United Parcel Service Inc. has ditched its €5.2 billion ($6.9 billion) takeover of TNT Express NV after learning that European regulators would reject the deal in its current form.
Though TNT will receive a €200 million ($265.5 million) break fee, it faces an uncertain future on its own. Its shares plummeted 505 to € 4.083 in the first minutes of Monday trading in Amsterdam following the bid’s failure. UPS had offered to buy struggling TNT, Europe’s second-largest delivery company, in May, to better compete with Europe’s largest, Deutsche Post’s DHL.
But regulators said in October that the deal would lead to over-concentration in the sector. In response, UPS offered to sell parts of the company’s small package operations and airline assets but after meeting with regulators on 11 January, UPS told TNT it saw no prospect of the deal being approved — and it wasn’t interested in further concessions.
In its last earnings report, for the third quarter of 2012, TNT lost €3 million on sales of €1.8 billion.
Former CEO Marianne-Christine Lombard quit the company in September mid-takeover, in a move that was criticized as “unethical” by TNT’s chairman, Antony Bergmans, and interpreted by some as a sign the deal was in trouble, since she stood to gain a €2.6 million bonus for seeing it through to completion. She was replaced on an interim basis by CFO Bernard Bot.
In a statement, TNT conceded that the “protracted merger process has been a distraction for management” and that it would now focus on reassuring customers, encouraging employees and making money. “Management will provide an update on its strategy in due course,” the company said.
UPS CEO Scott Davis said he was “extremely disappointed” with the stance taken by regulators. “We proposed significant and tangible remedies designed to address the European Commission’s concerns with the transaction,” he said, adding that the deal would have benefited customers worldwide and supported economic growth “particularly in Europe.”
The European Commission will publish its review of the deal within several weeks. Before UPS’s bid for TNT Express, some analysts thought rival FedEx might make a bid for the company, but FedEx executives said — in March 2012 at least — they had no plans to do so.