Big Brown’s Big Deal
In stark contrast to the air passenger and general airfreight sectors, both famously fractured into a myriad of global companies, the international express cargo delivery business looks more like other modern transnational industries dominated by a handful of
mega-players. On a global scale, United Parcel Service
(UPS), FedEx, DHL Express and TNT Express are
really the only games in town.
Which is why Atlanta-based UPS’s pending acquisition of Amsterdam-based TNT is of such consequence. If the € 5. 16 billion ($6.3 billion) deal goes
through as expected, the international express game
board will essentially belong to just three behemoths.
And, as has been seen in FedEx’s reaction to the UPS-TNT merger, an increasing number of regional and
domestic time-definite delivery operators are likely to
be scooped up by the new, and expanding, Big Three.
anatomy of a merger
The pending merger was not an overnight romance,
but rather a longer-term courtship, consummation
of which has been rumored for years. First, TNT had
to make itself a more attractive partner for a global
suitor. Until May 2011, TNT was a combined mail
and express company that didn’t make much sense
as an acquisition target. But the two businesses were
broken apart last year into separate companies, with
the mail portion becoming the renamed PostNL.
“It’s been very, very obvious for years now that
UPS seeks to reshape the global express cargo
landscape by acquiring rival TNT By aaron Karp
TNT was working on packaging itself and clean-
ing up its books so that it would be sold,” Jerry
Hempstead, an industry consultant and former DHL
executive, said. “It never would have been sold if they
had the mail business . . . They split the company up,
mail and parcel, in such a way than a lot of the [taxes
and liabilities] costs got loaded on to the mail side of
the business to make the package side more saleable.
TNT was doing everything in its power to make itself
pretty as a takeover target.”
On Feb. 17, TNT said publicly it had received an
“unsolicited” bid from UPS. The TNT board of direc-
tors rejected the proposal, saying the offer undervalued
its assets, but the Dutch company remained in talks with
UPS. By March 19, a deal was struck. UPS had upped
its bid slightly, and also persuaded TNT’s board that the
possible benefits outweighed potential pitfalls.
But the companies were thwarted in their effort
to close the deal in the first half of this year when
the European Commission (EC) stepped in and said
further review was necessary. The EC noticed that the
express delivery sector in some EU countries would
be dominated by UPS-TNT, and wants to consider
the antitrust implications.