Shares in Dutch firm TNT Express leapt by a third yesterday after FedEx announced a €4.4bn (£3.2bn) all-cash offer to acquire the beleaguered delivery giant.
TNT has struggled since European regulators prevented it from merging with UPS in 2013, with its market share declining by five per cent leading to a €137m loss in the final quarter of 2014.
Market conditions have remained tough for the embattled company, which was forced to admit it was not expecting an improvement in its fortunes until 2016.
The current offer from FedEx values each share at €8.80, representing a 33 per cent premium on last week’s close as the US delivery firm aims to expand its footprint in Europe. The deal is the latest move in a market where players seek to benefit from economies of scale. At stake is a market with combined sector revenues estimated to reach €62.5bn this year, according to Apex research.
For FedEx itself, the latest deal is significantly larger than its previous acquisition in Europe which saw it buy French delivery firm Tatex for $55m in 2012. But with an estimated five per cent of European market share, FedEx has been a bit player in a market dominated by national carriers such as Deutsche Post, Royal Mail and La Poste. This latest acquisition will change that, and see it more than triple its market share to 17 per cent of the parcel delivery market.
The joint entity would divest itself of TNT’s airline operations to comply with regulations, focussing on the combined strength of FedEx’s air feet with TNT’s extensive road network.
But the deal will still have to pass several regulatory hurdles, with it unlikely to be completed until the first half of 2016.
Despite the long length of time, analysts are optimistic about any regulatory threat or any disruption from a counter bid. They point out the most likely contender for a counter offer, Deutsche Post, explicitly stated its lack of interest in acquiring TNT back in 2013.
Frederick W Smith, chairman and chief executive of FedEx said: “We believe that this strategic acquisition will add significant value for FedEx shareowners, team members and customers around the globe.
“This transaction allows us to quickly broaden our portfolio of international transportation solutions to take advantage of market trends – especially the continuing growth of global e-commerce – and positions FedEx for greater long-term profitable growth.”
Investors in TNT responded well to the deal, with shares in the company closing up 27.23 per cent. FedEx shares also rose, closing up 2.69 per cent.
BEHIND THE DEAL: TIM GEE: M&A AT BAKER AND MCKENZIE
1 Education: Bedford School and Worcester College, Oxford. Has worked at Baker & McKenzie since 1984 after joining as an articled clerk, making partner in 2000.
2 Recent deals include advising Unilever on sale of Ren skincare in March. His most high profile deal was advising Nike on its acquisition of Umbro in 2007. He leads a team of 1,400 M&A lawyers.
3 Tim claims his worst experience as a trainee was throwing up at his first Christmas party. But claims he would take claret and Burgundy if stuck on an island.
JP Morgan is sole financial adviser for FedEx with NautaDutilh NV and Baker & McKenzie for legal. Goldman Sachs. and Lazard financial advisers for TNT, with Allen & Overy LLP legal.