Tags: ups | tnt | express | fedex | M&A

UPS Said to Reach Deal to Buy Europe's TNT Express

Sunday, 18 Mar 2012 03:40 PM

United Parcel Service Inc. reached an agreement to buy TNT Express NV after raising its bid for Europe’s second-largest express delivery service, according to two people with knowledge of the talks.

UPS will probably pay 9.50 euros ($12.51) to 10 euros per share for TNT Express and the deal will be announced as early as Monday, said the people, who declined to be identified because details are private. At 9.50 euros per share, UPS would pay 5.16 billion euros for TNT Express. Spokesmen for the companies declined to comment Sunday when contacted by Bloomberg News.

TNT said Friday it was still negotiating with UPS on a sale after turning down a Feb. 11 offer of 9 euros a share for the Hoofddorp, Netherlands-based company. Buying TNT will put Atlanta-based UPS on equal footing in the region with Deutsche Post AG’s DHL, the market leader.

TNT was spun off in May from the Dutch postal operator, which is now named PostNL and retains a 29.9 percent stake, according to data compiled by Bloomberg. TNT, whose name derives from the postwar Australian company Thomas Nationwide Transport, sold its Indian domestic road business in December and has been hurt by costs from revamping unprofitable Brazilian operations.

TNT gained 1.3 percent to 9.35 euros in Amsterdam on Friday, while UPS slid 0.7 percent to $78.41 at the close in New York. The U.S. company said in a statement Friday that talks with TNT had been extended, with a goal of sending a bid to Dutch regulators within 12 weeks of the Feb. 17 announcement when bargaining had begun. That timeline would end on May 11.

Deal Valuation

At the range of 9.50 euros to 10 euros a share, the takeover would value TNT at between 13 and 14 times its last four quarters’ earnings before interest, taxes, depreciation and amortization, compared with a median of 10 times trailing Ebitda in nine other similar deals, according to data compiled by Bloomberg.

A bid from UPS, the world’s largest package-delivery company, or chief competitor FedEx Corp. had been anticipated for years as the U.S. companies studied European expansion. That talk gained momentum after the spinoff of the express business.

UPS controlled 7.7 percent of the European express-parcels market in 2010, compared with TNT’s 9.6 percent, according to Transport Intelligence. Combined, they would be about as large as DHL, which had a 17.6 percent share.

Overlapping operations, particularly in Europe, could produce synergies for UPS worth in excess of 400 million euros, according to Andre Mulder, an Amsterdam-based Kepler Capital Markets analyst who recommends buying TNT shares.

“This is a once-in-a-lifetime opportunity,” Mulder said on Feb. 19. “Of the four major players globally, TNT is the smallest one, so it’s the last opportunity.”

UPS has completed the acquisition of Brussels-based Kiala to bolster delivery operations in Belgium, France, the Netherlands, Spain and Luxembourg, after several smaller purchases in recent years, according to Campbell, the Thompson Davis analyst. He recommends buying UPS and FedEx.

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