TNT makes demerger of Express and Mail units official
Speculation remains about possibility of UPS or FedEx acquiring TNT's Express unit
in the NewsApex Tool Group donates tools, use of warehouse to Harvey, Irma relief LM survey highlights the impact and importance of emergency preparedness following recent hurricanes eBook: Why Multi-Tier Supplier Collaboration is More Important Now FedEx sees earnings decline, due largely to TNT cyberattack FedEx rolls out 2018 rate increases More News
Following a December announcement in which Netherlands-based TNT N.V., a provider of mail and courier services and the fourth largest global parcel operator announced its intentions to “de-merge” operations by separating its Express and Mail operations into two separate companies, the company’s shareholders yesterday signed off on the move.
TNT officials said the reasons for the de-merger have to do with increasingly divergent strategic profiles of the two businesses of TNT N.V. and the “limited synergies” between them.
They added that the Mail business is faced with a continually declining mail market in the Netherlands and has to focus on sustaining cash flows and operational efficiency, whereas the priorities of the Express business are to grow its existing European networks, and to continue to grow its intercontinental business.
With this process now complete, it has been widely speculated that TNT’s Express unit is a prime acquisition candidate for either UPS or FedEx. German-based Deutsche Post World Net, and parent company of DHL, is not viewed as a buyer because it would create a monopoly status in Europe, which would be unlikely to gain approval from the European Union and be protested by FedEx and UPS.
“When TNT set about to do this, it was not shy in communicating to the parcel carrier out there that if they were interested in getting together to talk about a possible acquisition that they were open and amendable to having a conversation,” said Jerry Hempstead, principal of Hempstead Consulting. “Splitting Mail off, which had become a drag on the company’s stock, would make Express more desirable to FedEx and UPS.”
Hempstead said that were either FedEx or UPS to acquire TNT Express, TNT would be accretive to grounding its planes and putting its export traffic on either company’s express network, making those shipments extremely profitable, and, conversely, FedEx or UPS could take their own ground network in Europe down and put their packages on TNT’s network due to its size and scale advantages.
If UPS acquired TNT, it would then be larger in Europe than DHL and if FedEx bought TNT, they would be larger than UPS in Europe, added Hempstead.
Both FedEx and UPS have said in recent months that they are not considering acquiring TNT’s Express business.
A March Dow Jones report stated that FedEx considers the TNT business to be “too expensive,” adding that FedEx does not need to do a deal in Europe although company CFO Alan Graf said FedEx looks at possibilities for acquisitions frequently.
While Graf cited a high price tag for the TNT Express business, Dow Jones noted that FedEx CEO Fred Smith said in September that FedEx would possibly “get under the hood” and take a look at TNT if it were decisively for sale, although he cautioned that FedEx does not have a strategic imperative to make a deal in Europe. And Graf added that the company has its own “organic plans for growth in certain key European countries, which does not include making any acquisitions there.
As for UPS, media reports out of Europe in December indicated it will not be a potential buyer of the unit.
UPS Chief Financial Officer Kurt Kuehn told a German newspaper, the Boersen-Zeitung, that 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.
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.
About the AuthorJeff Berman, Group News Editor Jeff Berman is Group News Editor for Logistics Management, Modern Materials Handling, and Supply Chain Management Review. Jeff works and lives in Cape Elizabeth, Maine, where he covers all aspects of the supply chain, logistics, freight transportation, and materials handling sectors on a daily basis. Contact Jeff Berman
Subscribe to Logistics Management Magazine!Subscribe today. It's FREE!
Get timely insider information that you can use to better manage your entire logistics operation.
Start your FREE subscription today!
Improving 3PL Management: Glanbia Adds Muscle to Logistics Why Retail Supply Chain Transformations Fail - and how to get it right View More From this Issue