United Parcel Service on Monday agreed to acquire TNT Express, Europe’s second-largest package delivery company, in a $6.8 billion all-cash deal that will create the world’s biggest logistics group with more than $60 billion annual sales.
Netherlands-based TNT said it would recommend shareholders accept an improved offer of 9.50 euros ($12.54) per share, up from the 9 euro-per-share offer it rejected last month.
The sweetened offer represents a 53.7 percent premium over TNT’s closing price of 6.18 euros ($8.03) on Feb. 16, the day before the companies announced they were in negotiations. UPS reportedly made an initial informal offer of 8.25 euros ($10.80) in November.
TNT’s biggest shareholder, PostNL, said it would tender its 29.8 percent stake to Atlanta-based UPS, which is seeking a minimum acceptance rate of 80 percent.
“With this combination, both UPS and TNT Express will significantly enhance their ability to serve our combined customers’ complex global logistics needs. The additional capabilities and broadened global footprint will support the growth and globalization of our customers’ businesses,” UPS Chairman and CEO Scott Davis said.
The takeover is the biggest deal in UPS’s 105-year history, worth more than five times its previous record $1.25 billion acquisition of U.S. trucking company Overnite Transportation in 2005.
Following the transaction, approximately 36 percent of the combined group’s revenues will be generated outside the U.S., up from UPS’s current 26 percent.
UPS said the TNT takeover would add to its earnings per share in the first year and deliver annual pretax cost savings of $525 million to $725 million by the end of the fourth year after closing on the deal.
The combined company will control around 17.3 percent of the European express market, just behind Germany’s DHL Express, according to industry estimates. FedEx has an estimated 3.3 percent market share.
The acquisition also will give UPS access to TNT’s growing Asia-Pacific operations, including a domestic delivery network in China and a significant presence in Latin America, especially Brazil.
UPS Chief Financial Officer Kurt Kuehn said he expects European Union antitrust regulators to approve the deal without an in-depth investigation, but he did not say what the company is offering to allay potential competition concerns.
UPS’s confidence is underscored by its agreement to a $200 million termination fee it will pay TNT if the deal unravels.
UPS said it had no plans to close TNT’s hub at Liege airport in Belgium, which is close to its own hub in Cologne, Germany. But the company would not comment on potential disposals of operations or job cuts. It is “way early to talk about redundancies,” Kuehn said.
TNT posted a net loss of $225 million in the fourth quarter of 2011 for a full year loss of $351 million on revenues of $9.4 billion against an $86 million profit in 2010. The company, which split from PostNL in May 2011, announced plans in February to refocus on its core European operations, reduce its international presence and trim its fleet of 50 aircraft.
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