US DELIVERY company UPS has finally clinched a €5bn (£4.2bn) deal to buy TNT Express, a Dutch rival.
The valuation of its European counterpart is an increase of at least 50 cents on UPS’s offer of €9 per share in February, which was rejected.
That was already a hike from an offer of €8.25 a share last autumn.
It will surprise some analysts because of the generous valuation for TNT. But any merger is likely to involve slashing jobs to make up some of the costs.
And UPS could be forced to sell other assets or shrink in other ways in order to satisfy hawkish European competition authorities.
The deal could give UPS a boost over rivals like FedEx, which had been mooted as an alternative bidder for TNT Express when it rebuffed UPS’s previous offer.
It will also increase UPS’s firepower in competing against Deutsche Post’s DHL, its biggest rival in Europe with an 18 per cent market share of express parcel delivery.
TNT Express has a share of just under 10 per cent, while UPS has about eight per cent of the European market.
But the expected valuation of just over €5bn is a large premium to TNT’s rivals, which generally trade at a price equal to 10 times earnings. The price tag for TNT Express is, by contrast, around 14-15 times earnings.
UPS’s chief executive and chairman Scott Davis (pictured, left) has made international expansion one of his main missions for the Atlanta-based company.
It has also expanded outside parcel delivery and into supply chains and freight, having swallowed up more than 40 other companies over the last 13 years.
If it successfully buys TNT Express, however, the deal would be the largest one yet for the US firm.
Unlike TNT Express, which began as a spin-off from the Netherlands’ postal service in 2010, UPS was started as a private courier and message delivery service in 1907. PostNL, the Dutch mail company, still owns 30 per cent of TNT Express.
According to Dealogic, the UPS-TNT deal is the largest one announced in its sector in the last 18 months.
Both UPS and TNT Express declined to comment.