FedEx to buy TNT for $4.8 billion to expand Europe deliveries

Two years ago, a bid by UPS for TNT was blocked by competition regulators

FedEx Corp is seeking to buy Dutch package delivery firm TNT Express for an agreed 4.4 billion euros ($4.8 billion), aiming to succeed where United Parcel Service failed two years ago when its bid was blocked by competition regulators.

FedEx and TNT said on Tuesday they did not expect significant opposition from regulators. Unlike FedEx, UPS already had a strong European network when it bid for TNT.

FedEx will offer 8 euros in cash per ordinary TNT share, in a deal that would give the US firm access to TNT's European road network and TNT access to FedEx's global distribution platform.

The bid is 33% above TNT's last closing price in Amsterdam. TNT shares leapt more than 30% in early Tuesday trading towards the offer price.

"FedEx has laid on the table an attractive offer price," said ABN Amro analyst Maarten Bakker, who has a "hold" rating on TNT shares.

"With FedEx having always been the most logical predator of TNT Express, we see the chances of a competing offer as slim."

The deal has been unanimously recommended by TNT's supervisory board. TNT's largest shareholder, PostNL, said it would tender its 14.7% stake to FedEx. PostNL shares rose 17% in Amsterdam.

FedEx's offer is below the 9.50 euro per share bid for TNT from UPS, which was blocked by European regulators. UPS is fighting that decision in court, but it is unclear when a ruling will follow.

That decision was damaging for TNT, which had been counting on adopting much of UPS's logistics backbone. So TNT embarked on a restructuring programme, cutting costs, selling operations and investing in its road network in a bid to hold on to customers in a weak European market for business package deliveries.

TNT, which has been losing market share to competitors, warned in February it expected tough trading to continue in its main western European markets.

FedEx's decision to bid now follows a 17% drop in TNT shares over the past year, versus a 21% rise in the benchmark Dutch AEX index.

The strong dollar may also have helped: UPS's 9.50 per share offer was around $12.50 in dollar terms. Compare that with FedEx's 8 euro share offer, worth $8.75 today.

TNT reported a net loss of 137 million euros for the fourth quarter of 2014. It forecast an operating profit for 2015 but expects at least 250 million in further restructuring costs over the coming two years.

($1 = 0.9156 euros)