TNT slumps as UPS pulls bid on EU veto

Mon Jan 14, 2013 1:10pm EST
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By Sara Webb and Anthony Deutsch

AMSTERDAM (Reuters) - UPS (UPS.N: Quote) is dropping its $7 billion bid for Dutch delivery firm TNT Express TNTE.AS after European anti-trust regulators said they would veto it, leaving TNT's future in doubt and almost halving the value of its shares.

Shares in U.S.-based United Parcel Service Inc (UPS.N: Quote) gained 1.2 percent on Monday after the world leader in the sector said in a statement that European Union officials told it the EU executive Commission would veto the deal. An EU source confirmed that and said the decision could be made public as early as next week.

UPS wanted to buy the smaller firm for its European network and assets in fast-growing Asia and Latin America. While the collapse of the 5.2 billion euro takeover means a rethink at UPS, the impact is far greater on TNT, which is struggling in a weak European market and lacks a strategy for developing on its own after nearly a year of negotiations on the merger.

Investors wiped nearly 2 billion euros off its value as the share price dived 42 percent to 4.750 euros.

The two companies offered to sell some operations to ease concerns about competition in Europe, where rivals FedEx Corp (FDX.N: Quote) and DHL had lobbied the Commission to block the deal, a banking source said. But UPS and TNT failed to find buyers and planned asset sales were not enough to satisfy EU officials.

"It's more than a minor setback" for UPS, said Kurt Hoefer, research analyst at portfolio manager Golub Group in San Mateo, California, which holds UPS shares. "It would have been a nice addition to have TNT's domestic routes as part of the UPS system."

Having been blocked in its attempt at a large takeover, UPS will likely return to its prior strategy of pursuing strings of small deals on the continent, Hoefer said, adding, "I don't think they have any alternative but to grow it organically."

UPS will pay TNT a termination fee of 200 million euros.   Continued...

United Parcel Service aircrafts are being loaded with air containers full of packages bound for their final destination at the UPS Worldport All Points International Hub during the peak delivery day in Louisville, Kentucky, December 20, 2012. REUTERS/John Sommers II