United Parcel Service, Inc.
) saw a disappointing end to its $6.8 billion proposed
acquisition of Dutch shipping company, TNT Express. Challenged by
the European regulators' dejection with the proposed acquisition,
the company finally dropped its plans to acquire TNT.
This set back remains a big jolt for the company's aspirations
to grow in the European continent. Further, the company now
remains exposed to charges of $265.5 million to be paid to TNT
due to the termination of the agreement with the previously
stated terms and conditions.
In March 2012, UPS confirmed that it would acquire TNT
Express, representing the biggest acquisition in the 105-year
history of the company. UPS filed for the European regulatory
approval on June 15, 2012 and hoped the deal to be over by the
end of 2012.
Before the deal could come through, it got entangled into the
regulatory web of the commission. The failure of the commission
to deliver any verdict only resulted in inordinate delays and UPS
twice pushed the timeline for the deal closure. Lastly, it
eagerly looked forward to a successful completion of the deal in
Owing to the blockage, both UPS and TNT faced a hard time
convincing the regulators who cited competitive issues the deal
carried. The two companies even proposed sale of certain assets
to secure the proposal. However, all these efforts did not make
much of a difference and finally the take over has now been
declared to be prohibited by the European Commission.
Regulators fear that the deal might bring in unfair
competition affecting pricing policies and services, ultimately
impacting end-users. In addition, it would negatively
influence the market dynamics as UPS would have emerged as the
biggest player in delivery business in the European continent,
leaving only two other large peers; namely, DHL and
Prohibition remains a big disappointment for the company, as
it would mean losing significant synergies, which it expected to
realize from the TNT acquisition. Should the deal materialize, it
would boost UPS' footprint in Europe - particularly Britain,
France, Germany and the Netherlands - consolidating its position
as a global leader in the logistics industry with annual revenues
of more than €45 billion ($60 billion).
However, UPS seems to look beyond the failed TNT agreement,
and aims toward smaller acquisitions. In December 2011, the
company acquired Italian pharma logistics provider Pieffe Group
to enhance its position in North and South America, Europe and
Asia. Following this, it acquired a Belgian e-commerce company,
Kiala in February 2012.
UPS retains a Zacks Rank #3 (Hold) rating. For the long term,
we have a Neutral recommendation on the stock.
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