TNT Investors Eager for UPS Takeover

Investors in Netherlands-based logistics company TNT Express

are eager to see the company accept an offer from America-based United Parcel Service

. On Friday, management at TNT rejected an offer of €4.89 billion ($6.43 billion) from the American company. Besides the low ticket price, the board also wants better conditions attached to the offer that will not require as much restructuring as UPS would like. However, that restructuring may be necessary to save the company, as thinning margins put pressure on the European delivery company. While executives at TNT beleive they can get a better deal, investors are less confident, and with good reason. TNT lost

in the first three quarters of 2011 and is expected to post another loss for Q4 2011 when it reports quarterly earnings next week. This contrasts with earnings of

for 2010, which signalled 33 percent growth over 2009 as logistics demand climbed after the subprime mortgage crisis and before the European sovereign debt crisis. That sovereign debt crisis points to an important question that UPS and its investors need to ask: is now the right time to buy TNT? While UPS may be eager to expand, it should consider whether protracted problems in Europe and the likelihood of a recession

should make it reconsider its move. With Germany, Italy, and the Netherlands showing negative growth, demand for transport and logistics will shrink throughout the continent. Even if France can deliver on its promise for 0.5 percent growth, that will do little to help the eurozone, which saw growth of -0.3 percent in the last quarter. UPS has already dipped its toe into the European market by buying Belgian delivery company Kiala, which gave it a better presence in the Benelux countries as well as France and Spain. UPS has quietly expanded by purchasing smaller firms in a steady bid to expand the company. Expansion has helped it boost its top and bottom line, with the company releasing

in Q4 2011 thanks to an increase in sales volume. In total, the company had a 6 percent jump in revenue to $14.2 billion, with domestic revenue increasing 7.3 percent to $8.67 billion. While international revenue rose as well, up 3.5 percent to $3.15 billion, its smaller growth points to the fact that UPS's main cash cow is still the American market. Fortunately for the company, the American economy may be showing hints of improvement, but it is too early to tell if a recovery is on its way. The likelihood of an American recovery is far higher than that of Europe rebounding from its continued debt crisis and political stalemates, so UPS will probably see stronger growth at home before it sees growth across the Atlantic.

may dampen America's prospects, and put pressure on the logistics industry, which depends on affordable oil for its operating margin. If Europe's

raise oil prices, the logistics industry may see its bottom line take a hit, especially if global economies refuse to grow as much as economists would like. Europe's problems have been

for a while, but that is only an opportunity if acquisitions can be had at discounted rates. With the last bid from UPS offering 1.04 times total assets, the company may have already offered a premium on a shrinking company in a shrinking market. If UPS is intent on taking the biggest European transport firm, it should keep its offering price low while reminding Europeans that they are not in the strongest position to bargain right now.