United Parcel Service Inc.
) is planning to sell TNT Express' assets to the European Union
to meet the antitrust requirements for the completion of the
impending acquisition of the latter. The two companies have
reportedly decided upon selling TNT business units to 13
countries of the European Union and provide access to UPS'
networks in order to secure the $6.8 billion acquisition
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 is will emerge as the biggest player in delivery
business in the European continent, leaving only two other big
peers - DHL Express and
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 on
the direction towards which the deal is actually heading.
Besides TNT Express, UPS has been working over time to enhance
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.
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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