Amsterdam: Dutch mail and logistics company TNT is to separate its Express activities from its mail business and keep a 29.9% stake in the demerged unit. Thursday’s move cut TNT down to its old postal activities and could make Express a takeover target in a new consolidation wave in the global sector in which Fedex and United Parcel Service Inc are big rivals.
TNT shares were up 7% at €20.17 at 0927 GMT after the demerger details and on relief it had not sought fresh funds from shareholders.
The split into two listed companies was decided due to limited synergies between the two units and divergent strategic profiles and marks another major milestone in the checkered history of what were the Dutch state postal services that expanded into express and bought then Australian express firm TNT in 1996.
Mail will include postal operations in the Netherlands, Germany, Italy and the UK and will grow with its parcels business and international activities.
Express will focus on fast high-end standard parcels and freight and value-added services. Express will get a new listing and the old TNT NV will keep Mail and a stake in Express.
TNT said it would tender its remaining stake in Express in the case of a recommended bid for the activities and would only tender its stake in the case of an unsolicited offer if a majority of shareholders accept it.
Growth Express and Value Mail
Express, headed by chief executive Marie-Christine Lombard, has a target to generate and earning before tax and interest (EBIT) of €900 million ($1.2 billion) to €1.0 billion by 2015.
Lombard is now managing director of the Express activities. Group finance director Bernard Bot will go to Express Mail targets stable cash EBIT of 300 million to 370 million.
Mail will be headed by chief executive Harry Koorstra, already managing director at the postal activities and in charge of the restructuring of these activities where TNT is seeking 4,500 job cuts.
The internal separation will be completed on 1 January, 2011 and the transaction will be proposed to the shareholders meeting of May. There will be an interim dividend in March.
Peter Bakker will remain TNT CEO until the demerger.
“There are only two possible buyers for express: Fedex and UPS. For mail it would be private equity,” said ING analyst Axel Funhoff.
TNT Express could be worth a little less than €10 billion for a rival, while TNT mail was worth between €3 billion and €4 billion, depending whether it remained public or was bought by a private equity firm, Funhoff said.
Bakker told Reuters the Express stake could be sold by 2015.
TNT currently has a market capitalisation of €7 billion, or $9 billion compared to $70 billion for UPS and $28 billion for Fedex.
Mind the Gap
Analysts had feared TNT could make a cash call before the demerger to boost its equity base, but the company said the transaction proposed on Tursday avoids the need for a hike or other capital markets transaction prior to the demerger.
TNT is hosting an analysts day in London to detail the separation. It said there would have been an equity shortfall of €900 million if Express was demerged for 100% while there could be another €900-million writedown against equity in 2012 or 2013 due to accounting standards.
By keeping a 29.9% stake in Express at Mail, these issues are avoided. The sell-down of the minority shareholding is anticipated over time, after a lock-up of six months.
The proceeds will be used to reduce the debt in TNT NV, seen at some €1.2 billion, by €700-900 million.
Any excess capital will be returned to shareholders.
The history of the group goes back to the Dutch state-owned post and telecommunications services which were privatised under the name KPN in 1994. In 1998 the TPG postal activities were separated from the KPN telecommunications company and renamed into TNT in 2005.