Included in our Supply Chain Matters 2015 Predictions for Global Supply Chains (available for complimentary download in our Research Center) was our prediction for a turbulent and noteworthy year involving the global transportation. And so it has become.
Global package delivery and transportation provider FedEx announced today it has reached a conditional agreement of intention to acquire Europe based TNT Express in an all cash offering for TNT stock. According to the announcement, the transaction represents an implied value for Netherlands based TNT of approximately $4.8 billion. That value is noted as being a 42 percent premium over the average volume weighted TNT shares over the last three calendar months. The transaction has received the recommendation and support by TNT’s Executive and Supervisory Boards. Both carriers currently expect this tender offer to close in the first-half of calendar year 2016, thus allowing ample time for regulatory and other reviews.
This news has significant implications not only for potentially augmenting FedEx’s existing capabilities in Europe and globally, but also can be viewed as a competitive shot across the bow at rivals UPS and DHL.
Our readers might recall that in 2012, UPS set its sights on acquiring TNT for a reported value in excess of $6 billion. However that deal ran into stiff resistance from the European Commission relative to potential impacts within the existing European parcel delivery industry segment, and was later terminated. In the case of this latest offer, both companies indicate initial confidence that anti-trust concerns can be addressed adequately and in a timely fashion.
This news comes on the heels of FedEx’s late December announcement regarding the acquisition of both GENCO and Bongo International.
TNT’s web site notes that the package delivery carrier is one of the world’s largest express delivery companies with a global reach to 200 countries and a very strong position in Europe.
The tender announcement notes that the parties have agreed to have European regional headquarters of the combined company located in Amsterdam, and to respect existing employment terms of TNT Express. TNT Express airline operations are expected to be divested in compliance with applicable airline ownership regulations. The TNT Express brand name will be maintained for an “appropriate period” and three new FedEx selected members will join the Supervisory Board of TNT.
Further outlined in the agreement are provisions indicating certain termination fees related to material breaches of either party or failure to secure regulatory approval which calls for FedEx to pay TNT a €200 million breakup fee.
Obviously there will be more developments related to this news in the weeks and months to come. Many transportation industry observers expected FedEx to eventually make a move to acquire TNT when the time was right. Obviously, the value of TNT has declined since 2012 and the carrier likely needs an infusion of capital in order to grow.
The new challenge is how much lobbying power existing European package delivery carriers such as DHL, or even UPS exhibit with the European Commission. An open question is whether another carrier will also elect to tender an offer.
As other initial reports have noted, FedEx has had a good track record in assimilating successful prior acquisitions. The coming months perhaps provide another, perhaps more contentious episode.