The world's largest package delivery company
United Parcel Service, Inc.
) announced the extension of its public offer for all the issued
and outstanding common shares and American depositary shares of TNT
Express until November 9, 2012. Initially, the cash offer price of
€9.50 per share was slated to expire on August 31.
UPS is likely to announce the offer extension within three days
of the initial expiry date in accordance with the conditions
outlined in the Offer Memorandum dated 21 June 2012. UPS had filed
for the European regulatory approval on June 15 and received
approval from the executive and supervisory boards of TNT Express.
UPS expects the acquisition to close by the end of the fourth
quarter this year.
The reason behind the extension was a delay in the European
Union (EU) antitrust's decision on the acquisition of TNT Express.
The company stated that the review by the European Commission is
not expected to be over by the end of this month. In June, news
surfaced that UPS is facing a detailed investigation over this
deal. The regulators suggested that the takeover would likely
reduce competition in the international parcel delivery market,
thereby, affecting the end users. It was also reported that the
European Commission temporarily stopped its review process over the
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). The transaction will further expand the company's
presence in Asia and Latin America by providing an edge over
The combined company will generate about 36% of revenues outside
the U.S., up from the current 26%. UPS projects the transaction to
be earnings accretive in the first year and to generate pre-tax
cost synergies of €400 million to €550 million ($525 million
- $725 million) by the end of the fourth year after completion
(i.e. 2015). Furthermore, UPS intends to deliver a return on
invested capital of at least 25% by 2014 upon the successful
integration of TNT.
However, the company will incur one-time pre-tax costs of a
billion euros or more than a billion dollars to integrate the
operations of both the companies over the next four years.
Additionally, the fruitful integration of employees and operations
remains a risk to the company. Furthermore, UPS has to pay €200
million to TNT in an event of termination of the deal.
In addition to TNT Express, UPS has been working overtime to
expand its operations in Europe through smaller acquisitions. In
February 2012, UPS announced the purchase of a Belgian e-commerce
company, Kiala. In December 2011, the company acquired Italian
pharma logistics provider Pieffe Group to enhance its position in
North and South America, Europe and Asia.
We, currently, have a long-term Neutral rating on UPS. For the
short term (1-3 months), the stock retains a Zacks #4 Rank
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