UPS drops bid to create European parcel giant, TNT stock crashes

(THE HAGUE) - United Parcel Service(UPS) abandoned on Monday an attempt to create the biggest European group in the fight for the global parcel market, pulling out of a giant bid for Dutch TNT Express which immediately lost about half its value.

Both bidder and target had worked hard to get the deal past EU competition authorities, but UPS withdrew when it became clear that anti-trust officials were set on blocking the deal.

The decision to end the 5.16-billion-euro ($7.03 billion) takeover, announced by target company TNT Express, immediately slashed nearly two billion euros from TNT's capitalisation of 4.481 billion euros late on Friday to about half the value of the UPS offer.

Both companies said that UPS had agreed to pay a cancellation fee to TNT of 200 million euros.

In a separate statement the chief executive of UPS Scott Davis said the US-based company was "extremely disappointed with the EC's position."

"The combined company would have been transformative for the logistics industry," he added.

The announcement came after EU competition authorities had warned both parties that they were set to block the deal because it would have unduly restricted competition in Europe.

UPS had amended its terms in an attempt to satisfy the European Commission, but this was not enough.

The value of TNT Express plunged from 4.481 billion euros ($5.9 billion) on Friday to 2.56 billion euros on Monday morning, or to 4.10 euros per share at the opening of trading compared with the bid terms of 9.5 euros per share, but recovered to about 4.9 euros a share by mid-day.

TNT Express made clear in a statement that it had worked hard to help the deal go through, but the biggest loser from the cancellation stands to be the biggest shareholder in TNT Express, the Dutch postal delivery company PostNL.

PostNL owns 29 percent of TNT and hoped to use the proceeds of the takeover, about 1.5 billion euros, to reduce debt, analyst Nico van Geest of the Amsterdam-based Keijser Capital said.

TNT Express said it regretted the announcement by UPS and spokesman Cyrille Gibot told AFP: "We thought the merger was possible."

He said: "UPS was leading the process -- we did everything we could to support UPS to get clearance."

He said TNT would now focus on a "stand-alone strategy" but that "the goal was clearly to complete the merger," adding that more details would be announced later.

TNT Express said: "UPS informed TNT Express that UPS sees no realistic prospect that EC (European Commission) clearance can be obtained and that UPS will not pursue the transaction on any other basis."

UPS, based in Atlanta in the United States, said separately: "Upon prohibition by the EC, the offer condition relating to EC competition clearance will not be fulfilled and UPS will pay a termination fee in the amount of 200 million euros and will withdraw the offer."

Analyst Van Geest told AFP, when asked about the future of TNT, said it "remains strong in Europe and is rising in upcoming markets. It does not have any debt and is busy with its own cost-saving programme."

EU competition officials met UPS and TNT Express representatives on Friday and "informed the companies that on the basis of UPS's current remedy proposal it is working towards proposing a prohibition decision," TNT Express said.

UPS then told TNT it would not continue chasing the deal and that "formal termination of the merger protocol will occur upon receipt of the prohibition decision of the EC, which...TNT Express deems inevitable," TNT Express said.

In June, UPS launched a bid to take over TNT Express, but the EU competition authorities announced a month later that they would investigate the deal.

The EU said it was worried that the proposed merger would reduce the number of competitors from four to three and lead to a highly concentrated market for domestic and international express delivery services on the European continent.

The deal was expected to put UPS ahead of its two competitors as it would strengthen its position in Europe and globally.

UPS and TNT Express are major players in the sector for delivery of packages and are two of four firms with a comprehensive air and road delivery network on the continent.

Others present in Europe are DHL, owned by Deutsche Post, and FedEx, a US-based company.

TNT Express is a global player operating in more than 200 countries and maintains a leading role in the road freight network in Europe. It employs some 77,000 people.

UPS is the world's biggest package-shipping group, with annual revenues last year of $53.1 billion and 400,000 employees.