United Parcel Service and TNT Express said they will respond within a couple of weeks to the European Union’s antitrust concerns over their $6.8 billion merger.
The EU’s confidential statement of objections to UPS’s bid for its smaller Dutch rival is expected to result in concessions, including asset disposals, to allay fears the merged group will erode competition in the European express delivery market.
UPS and TNT said the statement of objections, sent to the companies at the end of last week, was a “normal step” in the EU’s merger review process and does not predetermine the outcome.
The companies claimed the takeover, agreed in March, would sharpen competition in the European logistics market. “The combined company will help create a more efficient logistics market, thereby improving the competitiveness of Europe and the solutions offered to businesses and consumers.”
“In addition, customers and consumers will benefit from a broader portfolio of services and better global access, along with lower supply-chain costs overall and improved service levels in terms of timing and reliability.”
The European Commission, the EU’s executive arm, is worried that the merger would leave only three big operators in the European market – UPS/TNT, Deutsche Post’s DHL Express unit and FedEx.
But UPS contends that competition also includes national post offices, such as GLS, the pan-European express unit of the U.K.’s Royal Mail, and DPD, a subsidiary of France’s La Poste, as well as global logistics companies like Kuehne+Nagel and Panalpina.
The EU competition commissioner Joaquin Almunia has said the companies must make concessions to secure regulatory approval for the deal, but he has declined to say what concessions he is seeking.
According to consultants AT Kearney, six companies account for more than 90 percent of Europe’s international express delivery market.
A merged UPS and TNT would have a quarter of the EU market ahead of DHL with 19 percent, according to Bernstein Research.