Market Overview

UPS Expands European Delivery Through TNT Express Acquisition

United Parcel Service will be expanding its delivery network in Europe, South America and Asia through the acquisition of TNT Express.

UPS (NYSE: UPS) agreed to acquire Netherlands-based TNT Express (NYSE Euronext: TNTE) for an all-cash offer of 9.50 Euros per share, 53.7% higher than the 6.18 Euro price of TNT Express Feb. 16, the day before the negotiations with UPS were announced.

TNT Express had earlier announced the rejection of a 9 Euro per share offer. The $6.77 billion acquisition will be UPS's largest. UPS earns 26% of its revenue internationally. After the acquisition the company expects to earn about 36% of its revenue outside of the U.S.

UPS expanded into Europe in 1976. Now the region accounts for half of the company's international revenue, about $6 billion. Two-thirds of TNT Express' $7 billion annual revenue comes from Europe. The acquisition will give UPS access to TNT Express' intra-Europe road freight network. UPS hopes to reach more customers in Britain, France and Germany.

UPS has focused on European expansion through the purchase of Brussels-based internet-purchase delivery provider Kiala Feb. 15. The acquisition allowed UPS to further expand into Belgium, France, Luxembourg, the Netherlands and Spain. UPS also acquired London-based parcel-carrier LYNX Express in an all-cash deal in 2005.

The TNT Express acquisition will also give UPS more growth opportunities in the fast-growing regions of the Asian-Pacific and Latin America, including China, India and Brazil, where TNT Express has been growing. In September TNT Express announced enhanced ground-shipping services between China and other countries in South East Asia.

“UPS and TNT Express will significantly enhance their ability to serve our combined customers' complex global logistics needs,” Scott Davis, UPS Chairman and chief executive officer said in a press release issued this morning. “The additional capabilities and broadened global footprint will support the growth and globalization of our customers' businesses.”

The acquisition is expected to save $725 million per year in four years, UPS said, after an anticipated $1.3 billion investment to merge the two companies during four years. Boards of both companies have approved the deal and pending regulatory agency approval the acquisition should be completed by the end of September. Divestments may be required to gain approval from European anti-trust groups.

Shares of TNT Express climbed more than 50% since the talks with UPS were acknowledged Feb. 17. They closed at 9.35 Euros Friday. TNT Express was formed when parent-company TNT NV split into TNT Express and PostNL NV (NYSE Euronext: PNL) May 26. The company reported a net loss of 270 million Euros in 2011.

Posted-In: News M&A Best of Benzinga

 

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