Subscribe to our free, weekly email newsletter!


TNT NV to ‘de-merge’ Express and Mail units

Company plans to sell Express business and focus on Mail operations; transaction expected to be completed by May 2011
By Jeff Berman, Group News Editor
December 03, 2010

Netherlands-based TNT NV, a provider of mail and couriers services and the fourth largest global parcel operator, said it plans to “demerge” operations by separating its Express and Mail operations into two independent companies.

Company officials said that the main reasons for an internal separation, which will take effect on January 1, 2011, are the increasingly divergent strategic profiles of the two units and the limited existing synergies between them.

As a result of this initiative, TNT NV will demerge Express and only focus on Mail activities, and will retain a 29.9 percent financial stake to cover separation agreements, which will be returned to shareholders as soon as possible, according to the company. And the demerger will be voted on by TNT shareholders next May.

The company also said that TNT NV CEO Peter Bakker will stay on board in his position until the demerger is complete and will subsequently resign thereafter. A Wall Street Journal report said that Bakker has been criticized by observers for being too slow to separate the company’s mail and express operations.

“Mail is faced with a continuously declining mail market in the Netherlands and has to focus on sustaining solid cash flows and operational efficiency,” said the officials. “Express’ priorities are to grow its existing strong European networks, to continue to grow the intercontinental business from and to Europe into adjacent markets and to secure contributions from its existing strong positions in China, South America, and India.”

Earlier this year, various media reports suggested that TNT was considering spinning off its Mail business by the end of 2010, although with this week’s news the opposite has happened.

CEO Bakker said in an April Financial Times report that partnerships could be one way of strengthening the Mail business or make it a part of European mail consolidation by potentially joining forces with competitors or consider a separate listing for the Mail business.

At this time, industry analysts floated the idea that industry bellwethers UPS or FedEx could make a play for TNT’s Mail business, given the geographical strengths and weaknesses of each company.

A research note from Stifel Nicolaus analyst David Ross said that FedEx commented at its recent analyst meeting that it has plenty of organic growth ahead in Europe and internationally and making a large purchase in their view is unnecessary. But Ross pointed out that “FedEx has the smallest market share of the big 4 [global parcel operators] and would benefit the most from the improved coverage.”

Ross also 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. “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.”

What’s more, Hempstead said DHL may not be inclined to make another major acquisition in the express space after the major losses it incurred in the U.S. with Airborne. He said that they are only now seeing their financials return to normal, coupled with FedEx and UPS emerging as the beneficiaries of taking Airborne out of the game.

Doug Caldwell, president of ParcelResearch, said TNT likely found it easier to sell off Express than to sell off its Mail division.

“Potential purchase buyers of the Express division, which obviously include FedEx and UPS, are not going to want the Mail division as it is a very different business model at this point,” said Caldwell. “It makes sense to separate these two companies. As far as changes to Express, it is not likely there will be many in the short-term, and I don’t think shippers will see a lot of changes as a result of this announcement.”

About the Author

Jeff Berman headshot
Jeff 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. .(JavaScript must be enabled to view this email address).


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!

Recent Entries

The Department of Commerce reported that January retail sales were up 0.2 percent compared to December and up 3.7 percent annually at $449.9 billion, and the NRF reported that January retail sales, which exclude automobiles, gas stations, and restaurants, rose 0.6 percent over December and 1.4 percent compared to January 2015.

On the freight shipments side, Cass reported that January shipments––at 1.025––trailed December by 1.3 percent and January 2016 by 0.2 percent. These declines were less than the 4.9 percent drop from November to December, though, and January shipments still topped the 1.0 mark for the 65th straight month in December.

The Department of Transportation’s Bureau of Transportation Statistics (BTS) reported this week that its Freight Transportation Services Index (TSI) saw a 0.4 percent decline from November to December, its second straight decline on the heels of a 1.0 percent decrease from October to November.

Carloads saw a 11.7 percent annual decline at 241,680, and intermodal containers and trailers rose 10.5 percent to 262,830

An amendment to the International Maritime Organization’s Safety of Life at Sea convention will go into effect requiring all shippers (importers and exporters) to certify and submit the Verified Gross Mass – the combined weight of the cargo and the container – to the steamship line and terminal operator in advance of loading the container aboard a vessel.

Comments

Post a comment
Commenting is not available in this channel entry.


© Copyright 2016 Peerless Media LLC, a division of EH Publishing, Inc • 111 Speen Street, Ste 200, Framingham, MA 01701 USA