TNT Haggles Over Price As UPS Still Keen

March 17, 2012

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United Parcel Service's plan to buy Dutch delivery firm TNT Express moved into a new phase on Friday that looked set to deliver the US firm its prize even though price is still an issue between the companies.

UPS confirmed it was still interested, and said it would seek Dutch regulatory approval for a firm offer by May 11. It made the statement in an update bidders in the Netherlands are obliged to give four weeks after an initial approach.

UPS said talks were "constructive". No rival bid has emerged, and in the meantime TNT has reported weaker than expected results and offered a bleak outlook.

Two sources familiar with the situation said the two parties were trying to reach final agreement on price on the roughly EUR€4.9 billion (USD$6.4 billion) deal.

UPS last month proposed EUR€9 per share, an offer the Dutch company rejected. The parties are now hoping to reach a deal by the end of next week, the two sources said.

"If we don't find an agreement next week, then we'll be in trouble", said one of the sources, who is familiar with TNT. Any longer wait could cause UPS to lose patience, he said.


The talks are also focused on social issues including the location of TNT's headquarters, employment and the pension fund after TNT rejected UPS's latest bid in February. But these issues had now successfully been resolved, the sources said.

"All is now good on social issues", the first source said. "Price is the issue".

TNT Express is not expected to extract a price much higher than EUR€9 a share after the company reported weaker than expected results amid a bleak economic outlook.

"TNT performance is a big issue", a source close to UPS said.

In the absence of a new suitor or glaring regulatory issues, UPS has little incentive to improve its last offer, the sources said.

The US suitor could however offer a symbolic sweetener to win board recommendation, a common practice in such transactions, the first source said.

Some TNT shareholders still held out hope of a counter bid from FedEx, but sources familiar with the discussions said there had been no advances.

TNT Express, which employs people 83,000 worldwide and 3,000 in the Netherlands, has unspecified pension liabilities and is in the middle of a costly restructuring plan to counter declining delivery volumes and reduce costs.

PostNL, TNT Express's largest shareholder which shares a pension fund with TNT because the companies were once both part of the Dutch state mail company, relies on the proceeds of a deal to pay a pension deficit, the first source said.

Trade union spokesman Reinier Stroo said on Friday the Dutch employees are most concerned about keeping full pensions and "social character" of the company.

"It would be a waste for UPS to replace the well-known TNT brand in Europe with its own brown stickers," he said. "We are pushing for them to guarantee jobs, pensions and favourable terms of employment TNT is known for."

The companies have some overlap in Europe, such as in the freight business, and UPS has a regional headquarters in Germany, but Stroo said he doesn't expect redundancies.