UPS & TNT Deliver – A Major Takeover Without Much Criticism

Having analysed media coverage of a number of recent M&A bids, the most striking about the UPS acquisition of rival TNT was the lack of controversy. In contrast to, say, last year’s vilified AOL-Huffington Post takeover, the reaction was almost universally favourable. To some extent, it was good publicity for all four of the top global delivery companies – UPS, FedEx, DHL, and TNT, with only slight variances in emphasis across the world’s media.

As you might expect, European sources generated more than 50% of all media activity, North America contributed a quarter. The former tended to refer more to DHL (and owner Deutsche Post) in relation to the proposed new entity, while the latter’s emphasis was on Memphis-based FedEx.

The trade press and European nationals reported concerns and reassurances regarding job cuts from unions and UPS/TNT spokespeople, concluding that it was too early for concrete decisions. Stock watchers generally designated the purchase a strongly positive move for UPS, and for loss-making TNT. Stifel Nicolaus analyst David Ross’ decision to downgrade UPS stock from Buy to Hold upon news of the acquisition was widely reported but alone in its criticism. Transaction volumes were broadly in line with media coverage of announcements. There was mild sniping from main European rival Deutsche Post about “serious antitrust concerns”, which was countered almost immediately by virtually everyone else stating that existing conditions would meet legal requirements, followed up by news of the sale of TNT’s airline unit to remove a potential obstacle.

In the aftermath of the announcement, some industry experts declared that FedEx or DHL would have been a far better fit for the acquisition. Several analysts even seemed to try to inject a little excitement into the proceedings by goading FedEx into making a counter-bid, noting that there was still time for the US firm to make one. But both FedEx and DHL flatly denied any interest in TNT.

Given the current economic climate, 2012 will likely see further consolidations in various industries. We’ll be watching closely to find out whether these trigger such favourable exposure.

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