FedEx Seeks European Approval for TNT Express Acquisition

By Amos Maki

European Union regulators should rule on FedEx Corp.’s bid to acquire Dutch logistics firm TNT Express by Aug. 3.

Memphis-based FedEx on Friday, June 26, submitted a required filing to the European Commission to obtain regulatory approval for the nearly $5 billion takeover of TNT Express, the largest deal in FedEx’s 42-year history.

FedEx is seeking regulatory approval for its $4.9 billion takeover of TNT Express. The proposed deal would significantly boost the company’s European market share.

(DOUG MENUEZ)

The preliminary review by the commission, the EU’s executive body, can take up to 25 working days but can be extended by another 10 working days if FedEx makes concessions to allay any possible regulatory concerns.

Meanwhile, FedEx also intends to submit its formal offer document with the Netherlands Authority for the Financial Markets before Tuesday, June 30, the Dutch legal deadline for submitting the detailed takeover information.

FedEx now expects the deal to close during the first half of 2016. Shares of FedEx closed Monday down $2.64 to $171.02.

FedEx announced in April that it had reached an agreement to acquire TNT, one of Europe’s largest package delivery and logistics companies with an extensive road network. While FedEx already has an extensive European air network thanks to FedEx Express, it has lagged behind rivals DHL and United Parcel Service in ground delivery services.

The acquisition of TNT would provide FedEx with an established ground delivery system, better positioning the company to take advantage of the expected growth of e-commerce in Europe.

"This transaction allows us to quickly broaden our portfolio of international transportation solutions to take advantage of market trends – especially the continuing growth of global e-commerce – and positions FedEx for greater long-term profitable growth," said FedEx chairman, president and chief executive officer Frederick W. Smith, in a statement.

FedEx’s TNT acquisition should lead to a large increase in the company’s European market share. Currently, FedEx is one of the smallest logistics operations in Europe, trailing DHL, UPS and TNT. Once the acquisition is approved, FedEx could replace UPS as the second largest logistics operator in Europe and trail only DHL in terms of market share.

FedEx said it will fund the purchase with about $2.3 billion in new debt, $1.7 billion in cash from existing resources and $1 billion from an existing credit facility.

FedEx’s push to acquire TNT comes two years after UPS dropped a $6.8 billion takeover bid for the company. UPS withdrew its offer after European antitrust regulators said the proposed deal could have resulted in a duopoly between DHL and UPS.

FedEx’s push to acquire TNT and its extensive road network comes as the company prepares to invest heavily in FedEx Ground as it seeks to keep pace with the growth in online shopping. FedEx is expected to spend around $1.6 billion this year on its ground-network expansion.

The TNT acquisition could help boost profits at FedEx, which missed revenue and earnings estimates in its fiscal fourth quarter.

FedEx, which released earnings June 17, reported a loss of $895 million, or $3.16 a share, for the quarter that ended May 31. That’s compared to a profit of $780 million, or $2.62 a share, over the same period last year.

FedEx reported an adjusted net profit for the fiscal fourth quarter of $753 million, or $2.66 per share, unchanged from $753 million, or $2.54 per share, a year earlier. Analysts had expected earnings per share of $2.68 for the quarter.

FedEx said revenue and earnings were negatively impacted by lower fuel surcharges, unfavorable currency exchange rates and special charges relating to pension changes and a lawsuit settlement.