TNT Rejects UPS Bid, Talks Continue

February 17, 2012

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Dutch delivery company TNT Express rejected a EUR€4.9 billion (USD$6.45 billion) takeover offer from US-based rival United Parcel Service, but the companies said they remain in talks.

UPS offered EUR€9 per share for all outstanding TNT stock, a 42 percent premium over TNT's Friday closing price of EUR€6.343. The bid is about equal to the EUR€5 billion price tag that analysts have recently assigned to TNT.

UPS, the world's largest package delivery company, has long been rumoured to have an interest in TNT. The bid from Atlanta-based UPS came about nine months after TNT split from delivery firm PostNL and amid increasing shareholder pressure on TNT to shake up its board and make moves aimed at boosting shareholder value.

In a statement on Friday, UPS officials made it clear the US company and its Dutch rival have discussed more than one offer already. UPS said the EUR€4.9 billion bid was a "revised, increased and comprehensive proposal to acquire the entire issued share capital of TNT."

"We are open to advancing the talks, and we continue to be in discussions," Ernst Moeksis, spokesman for TNT said.

"I find it difficult to believe that there's going to be a significant bidding war for these assets," said Art Hatfield, managing director in equity research at Morgan Keegan. "It's a good offer."

TNT, which has suffered declining revenues internationally as economic pressures have led an increasing number of customers to abandon air transport in favour of cheaper shipping options.


TNT Express's struggles have prompted calls among stakeholders for moves to increase shareholder value, including a potential takeover.

Bowing to pressure from activist shareholders, TNT Express this month agreed to appoint several new members to its supervisory board, including two candidates proposed by American investor Jana Partners. Jana and Canada's Alberta Investment Management (AIMCO) have a combined stake in TNT Express of just over 5 percent,.

Jana called for an overhaul of the TNT Express supervisory board in December, including replacing the chairman, and urged the company to explore a sale.

PostNL is the largest shareholder in TNT Express -- holding 29.9 percent -- and has taken impairments of more than EUR€700 million on its stake in recent months. The company declined to comment on the UPS bid, but it has already indicated that it would support a possible takeover.

Analysts did not rule out a potential counter-offer for TNT from FedEx, UPS's chief US competitor. FedEx has a much smaller slice of the Europe market, where TNT is strong, than does UPS.

"We had expected Fedex to move as its European domestic share is only 2 percent," Andre Mulder, analyst at Kepler Capital Markets said, said in a research note. Mulder said FedEx "has zero debt and could easily cough up this amount if it could find the banks to lend it the money."

Mulder said TNT is the market share leader in Europe with 18 percent. UPS has 10 percent, the analyst said.