Deutsche Post IPO threatened by investigations

By Staff -- Logistics Management, 11/1/2000

Deutsche Post AG, the government-owned German postal service, is trying to settle three disputes that are threatening its initial public offering of stock, set for Nov. 20. The German government plans to list one-quarter to one-third of its shares in the IPO, making it one of Europe's biggest stock sales this year.

European Union antitrust officials are investigating Deutsche Post (DP) for allegedly using its home-country advantage to keep competitors at bay illegally. EU investigators said last month that DP had offered rebates to large mail-order customers that met an annual minimum volume and agreed to ship all of their parcels through Deutsche Post. The rebate scheme prevented private parcel-service providers from gaining market share in Germany in violation of EU regulations, according to that report. As a result of that investigation, Deutsche Post has agreed to modify its rebate programs.

In a second case, DP reached an agreement with the British Post Office, which-together with United Parcel Service Inc., the Dutch postal authority, and several other competitors-had alleged that the German postal service was intercepting, surcharging, and delaying cross-border mail. "We hope these decisions will have a positive influence on the two EU competition investigations,'' says Deutsche Post spokesman Uwe Bensien.

A third inquiry, regarding whether profits from its letter-delivery service in Germany were used for other activities, could hurt the company's bottom line at a vulnerable time. If found liable, Deutsche Post could be forced to repay billions of German marks just before the IPO.

Top executives at Deutsche Post remain confident that there will be strong demand for its stock. The company has been rapidly growing through numerous acquisitions-its latest bid is to buy a majority stake in DHL International for about $745 million. Last year, Deutsche Post bought global freight forwarder Air Express International for $1.14 billion and combined it with its Danzas subsidiary, creating Danzas-AEI, one of the world's largest international logistics providers. In the past two years, the German postal company also purchased ASG of Sweden and took over the European transport and distribution division of P & O Nedlloyd, the Dutch-British company.

Deutsche Post is under pressure from regulators who want to cut into its monopoly on German letter deliveries. The European Union plans to open the domestic mail market in 2002, though industry observers predict nothing will happen before 2004.