Failed bid by UPS to acquire TNT is annulled by European General Court

Transportation and logistics bellwethers UPS and FedEx are in constant competition, whether it is in the air or on the road. That has been a constant for decades.

They also were in heavy competition for the rights to acquire TNT Express NV, a provider of mail and courier services and the fourth largest global parcel operator. FedEx eventually won that fight, officially bringing TNT into the fold for $4.8 billion in May 2016.

Getting to that point, though, was replete with many chapters, though. In 2012, TNT UPS for $6.8 billion, but the deal was squashed, following a formal decision from the European Commission, the executive body of the European Union, which prohibited the acquisition. Many of the EC’s concerns over the deal were due to the competitive parcel landscape in Europe. And FedEx being a distant fourth in Europe in terms of market share made attempts to stop the sale difficult. TNT had been looking for a buyer of its express business since 2010, when it split out its mail division. And UPS subsequently had to hand over $267 million Euro (roughly $344 million in U.S. dollars), because of prohibition by the European Commission and the Offer Condition relating to the EU Competition Clearance not being fulfilled and UPS paying TNT the and withdrawing the offer.

But fast-forwarding nearly four years later, it appears that the European Union’s decision is not what it previously was, when it led to FedEx eventually acquiring TNT.

The reason for this was laid out in a Reuters report published yesterday, which explained that after losing its bid for TNT, UPS challenged the EU’s decision at the general court, which resulted in the annulment of the EU decision made yesterday, due to what it called a procedural irregularity.

According to the report, the court said the Commission had infringed UPS's rights of defense by using a different econometric model in its analysis than that used in previous exchange of views and arguments.

“UPS might have been better able to defend itself if it had at its disposal, before the adoption of the contested decision, the final version of the econometric model chosen by the Commission,” the court said in the report.

In comments provided to LM, UPS was diplomatic in regards to the court’s decision.

“UPS is pleased to see that its reasoning was upheld by the European General Court,” the company said. “While the decision in UPS’s favor makes a number of points, the most significant of this decision is its impact in helping to preserve a competitive environment in Europe by clarifying the procedure and relevant criteria for merger approval. UPS has operated in Europe for over 40 consecutive years and continues its investment program into its integrated global network in which Europe plays a key role.”

Even without having TNT in its stable, UPS remains committed to Europe, as evidenced by its January acquisition of Freightex, a provider of truckload, less-than-truckload, specialized, and refrigerated over-the-road services. At the time of that deal, UPS said that according to Grand View Research the European 3PL market was forecasted to hit $174 billion by the end of 2016.

And in March 2016, UPS said it had broken ground to expand its package sorting and delivery facility in Herne, Germany, an $80 million project that is expected to be completed by the end of 2017.