Roughly 10 months after a deal was first announced that Dutch express delivery company TNT express had agreed to be acquired by parcel delivery giant UPS for $6.8 billion, a long litany of objections by the European Commission has led UPS to just call the whole thing off. Believing that the EC plans to prohibit the acquisition, UPS has announced that it will withdraw its offer to purchase TNT. In the process, UPS will pay a €200 million (US$267 million) termination fee.
“We are extremely disappointed with the EC’s position” says Scott Davis, UPS’ chairman and CEO, in something of an understatement. “We proposed significant and tangible remedies designed to address the EC’s concerns with the transaction. The combined company would have been transformative for the logistics industry, bringing meaningful benefits to consumers and customers around the world, while supporting growth in Europe in particular.”
UPS had submitted an initial remedies proposal back in November 2012, and then revised the proposal twice, ultimately to no avail.
According to Joel Ray, head consultant at Transport Intelligence, “It is hard to see what the EC sought to achieve through the negative stance they took to this deal. Their decision-making process looks flawed, caused by a fundamental lack of understanding of the industry. It seems to have been driven by a desire to engineer a market structure through political motivations. European shippers would have gained from the acquisition through a strong new road- and air-based player. This decision has set the market back many years, and risks reducing competition, not increasing it.”
The combined UPS/TNT would have been a global $60 billion company.
TNT’s fallback position, for now, will be to concentrate on reassuring its existing customer that it will continue to provide logistics services, while aiming to engage and reenergize its employees who are understandably going to be somewhat shellshocked by the news.
UPS, meanwhile, will continue to execute on its growth strategy, Davis notes. While acknowledging that the TNT offered “a compelling growth platform,” he nonetheless expects UPS will be able to capture other opportunities. What those might be, however, he left unsaid.