[Business] FedEx bids for TNT, will a more competitive market emerge?

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Courier Industry: FedEx's Bid For TNT Will Create A More Competitive Market
Source: Forbes

US courier giant FedEx Corporation's bid for Dutch rival package delivery firm TNT Express N.V. to expand its European operation has sparked a boost in courier company shares. A joint statement on the FedEx website from both groups states that a "conditional agreement on a recommended all-cash public of €8.00 per ordinary TNT Express share" had been reached – a 33% premium on TNT's closing share price before the announcement came this April.

Coming two years after United Parcel Service (UPS) pulled out of a €5.2bn bid for the Dutch firm, both FedEx and TNT Express are confident that the deal should fly without much of a hitch. Alan Graf, FedEx's chief financial officer, speaking on an analysts call stated that he was "very confident" in regulatory approval being secured.

The news was certainly good news for the respective share prices: FedEx shares up 3.7% in early trading on the New York Stock Exchange on 7 April while TNT shares up c.30% in Europe. And, it represented a hefty 42% premium over the average volume-weighted price of TNT Express shares of €5.63 over the last three calendar months.

However, some industry pundits are warning that the takeover could fall foul of the European Union (EU) competition authorities, in the same way that UPS' €5.2bn Euro bid did two years ago. But Sumner-Rivers contends that the FedEx-TNT merger is "significantly less likely to spark fears of a monopoly in Europe."

Mr Sumner-Rivers commenting further says: "This merger will most likely succeed because FedEx and TNT are a shrewder fit than UPS and TNT were. They complement each other without overlapping significantly."

He adds: "UPS' primary goal in seeking to takeover TNT was to build on its already substantial European business, which would have resulted in the combined company holding an unassailable 30% of the European market. The FedEx TNT merger is far less likely to fall foul of EU competition authorities." Let's hope so. On a positive note here a FedEx-TNT tie up would command around 17%-18% of the market. That is a level below the 30% mark that could be a concern for the European regulators.