Report indicates UPS will not make a move for TNT’s Express unit
December 10, 2010
Following the recent news that TNT, the fourth largest global parcel operator, plans to sell off its Express unit, media reports out of Europe indicate that UPS will not be a potential buyer of the unit.
UPS Chief Financial Officer Kurt Kuehn told a German newspaper, the Boersen-Zeitung, that the UPS does not intend to make any large acquisitions in the future. But he did say that the company may be more inclined to focus on small and medium-sized acquisitions in Europe rather than buying TNT’s Express unit.
Using DPWN DHL as an example, Kuehn explained that expanding too quickly into a region—as DPWN DHL did when DHL Express acquired Airborne Express in 2003 to establish a U.S. domestic presence—can be dangerous. DHL Express eventually pulled out of domestic operations in the U.S., due to severe financial losses and facing myriad challenges keeping up with the more established and larger UPS and FedEx.
“There are two strategies to climb the mountain; DHL selected the fast way, but when it reached the summit, it was exhausted and vulnerable,” Kuehn told Boersen-Zeitung.
A Reuters report stated that Kuehn said that any potential acquisition made by UPS would potentially be in Central Europe, Eastern Europe, or Turkey and would not necessarily be in the Express sector, and instead could be in the supply chain services arena.
A research note by David Ross, Stifel Nicolaus analyst, explained that UPS has denied interest in acquiring TNT’s Express business recently, adding that UPS already has a very strong European footprint—with roughly 50 percent of its International Package business Europe-related—and he noted that because of that fact it would make even less strategic sense for UPS to acquire TNT.
“I would say it is a mistake for either UPS or FedEx to buy [TNT],” said Jerry Hempstead, principal of Hempstead Consulting, in a recent interview. “It would just be the same mistake DHL made when they acquired Airborne. But UPS and FedEx are in this express and ground space already, and I can just see them not being able to resist the urge to get their brand on everything and forget why they are in business in the first place. And I can’t see the European Union letting DPWN-DHL buy TNT, because it then creates more of a monopoly in Europe.”
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