As the express delivery market has an increasing potential for bigger revenues, it only makes sense for the companies in the field to try strategies that will enforce their market share. For that reason, UPS decided to extend and strengthen its network with the purchase of TNT.
It is the biggest deal United Parcel Service Inc. (UPS) has ever undertaken in his history. It is a big step the company has decided to take, but the purchase of TNT can be what it needs to recover the market share lost in favor of Deutsche Post AG.
A joint statement released at the beginning of the current week stated that the two companies have agreed on a selling price of 9.50 euro per share to be paid in cash. Earlier this year, previous talks and data that leaked from negotiations, were pointing to a smaller bid, at 9 euro per share.
For Neil Glynn, analyst with Credit Suisse, it came as a surprise that the price shifted from 9 euro per share to 9.50 euro. He said: “I thought that a lot of shareholders would have accepted 9 euros. I think UPS is paying a very, very big number. The synergies they’re seeing are pre-tax, it’s important to remember”.
Several players in the market have already raised concerns that the UPS – TNT deal might result in undermining smaller competitors. Deutsche Post DHL made the first official claim and stated the deal should be investigated by the European Commission.
Marie Christine Lombard, TNT Express head, said: “It’s a difficult day and a great day. Difficult because TNT is a proud company and it is difficult to agree to be acquired”. However the deal carries the potential of a raving success for both players. As Lombard added, “it’s a great day because the combination of the two companies… will be enhanced and really deliver the global leader that will be unequalled”.
The decision to sell TNT wasn’t exactly easy. Management has been under pressure from investors for some time now to do something about the company’s losses. Since UPS has been targeting TNT for a while now as its primary way to expand its operations throughout Europe too, the deal was approved without worrying too much about TNT’s pride.