FedEx agrees to buy TNT Express for €4.4bn

FedEx has struck a deal to acquire struggling rival TNT Express for €4.4 billion, ramping up the US delivery group's presence in Europe and sending shares of the Dutch company up 30 per cent.

Both sides said the combined company would create “a strong third competitor in Europe to take on DHL and UPS”, anticipating no repeat of European regulatory issues that scuppered UPS’s takeover attempt in 2013.

“You have two strong companies and two weaker ones, now there will be three big ones who will fight very hard for customers,” said Antony Burgmans, chairman of TNT.

"What the European Commission would like to see is greater competition – it's better for the customer," said David Bronczek, FedEx chief executive . He added he was "confident" that regulatory hurdles could be cleared, though it could take one year for the deal to finally complete. A break fee of €200 million will be payable to TNT if it does not, the companies said.

The consolidation comes as Europe’s delivery sector undergoes a scramble for market share, as rivals discount to win customers. DHL had a 19 per cent share in Europe based on 2013 data, compared to UPS on 16 per cent, TNT on 12 per cent and FedEx on 5 per cent, according to Allan Smylie, transport analyst at Davy.

TNT will have to sell its airline operations. FedEx, which has more than 660 aircraft, said TNT’s road network – connecting more than 40 countries and more than 550 delivery depots – would be “highly complementary”.

Cash offer

The companies said they had reached “conditional agreement” on a cash offer by FedEx of €8 a share, giving TNT an equity value of €4.4 billion.

The offer is 33 per cent higher than TNT Express’ closing share price last Thursday, and a 42 per cent premium compared to the average over the past three months.

-(Copyright The Financial Times Limited 2015)