The much awaited
United Parcel Service Inc.
) and TNT Expressdeal suffered a setback with glitches in the
disposal of assets. Market reports suggest that UPS' biggest
) has shown no inclination to buy TNT assets. Though nothing has
been reported officially, UPS has been making efforts through
informal channels to persuade FedEx to buy certain assets of TNT
to secure the deal.
In December, it was reported that UPS is contemplating to sell
TNT Express' assets to the European Union to meet the antitrust
requirements for the completion of the impending acquisition of
The divestiture, which will resolve UPS' acquisition-related
concerns, is now subject to customer and competitor feedback. It
will also help the European Commission in giving the green signal
to the biggest deal in the 105-year history of UPS.
UPS has been fighting a long battle with the antitrust
regulators and has already pushed the timeline for the deal
closure twice. UPS filed for the European regulatory approval on
June 15 and hoped for the deal to be over by the end of this
year. However, the latest reports indicate that completion dates
have been postponed to February 2013 due to regulatory
The main concern in approving the TNT acquisition is the
impact that it would have on market competitiveness. If the deal
materializes UPS will emerge as the biggest player in
delivery business in the European continent, leaving only two
other big peers - DHL Express and FedEx
Further, the deal would consolidate UPS' position as a global
leader in the International market with annual revenues of more
than €45 billion ($60 billion). Regulators fear that the deal
might bring in unfair competition affecting pricing policies and
services, ultimately impacting end-users.
However, we remain hopeful that UPS' plans to safeguard this
mega acquisition would add some pace to the whole legal process.
Further, in the coming days, we can expect some clear insight
into the direction towards which the deal is actually
UPS retains a Zacks #3 Rank, implying a short-term (1-3
months) Hold rating. For the long term, we have a Neutral
recommendation on the stock.
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