TNT investors hold out for higher UPS bid buyout

[TrueBlueTerrier]

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Investors in Dutch freight and delivery firm TNT Express are pressing for a higher offer from U.S.-based United Parcel Services Inc.(UPS-N76.76----%) <UPS.N>, driving shares up more than 60 per cent to an all-time high on Monday.

TNT said on Friday it had rejected an offer from UPS, the world’s largest package delivery company, of €9 a share, which valued the company at €4.9-billion , but that both companies were still in talks.

A source close to the talks said shareholders wanted to sell their stock and hoped to get between €9.5 and €10 a share for a company which offers Atlanta-based UPS a bigger presence in Europe. Some TNT investors had called for a management change because of poor revenue, profits and share price performance.

“Everyone is expecting a higher bid,” SNS fund manager Corne van Zeijl said on Monday, adding that rival FedEx (FDX-N92.99-2.01-2.12%) may enter the fray. He said he expected UPS would win the prize.

“FedEx can possibly come with an offer. Ten euros per share is possible. Because FedEx is smaller, they can finance it less easily.”

Mr. Van Zeijl said he was holding out for as much as €11 a share.

Dutch post firm PostNL, which is TNT’s biggest shareholder with a 29.9-per-cent stake and holds the key to any talks with a buyer, declined to comment.

TNT shares hit an all-time high of €10.24, up more than 60 per cent from Friday’s closing price of €6.34. The stock closed at €10.18.

Analysts say UPS has long harboured an interest in TNT, which would help it expand in Europe, especially in Britain, France, Germany and the Netherlands, as well as in fast-growing Asian markets.

“The first time UPS looked at TNT was about 15 years ago. At that time, TNT was ‘a must have.’ Now it is ‘nice to have,’” said a sector banker familiar with the U.S. firm’s thinking.

“Still TNT remains a ‘once in a decade opportunity’ for a player like UPS.”

About two-thirds of TNT’s revenue is from European customers, but it also has been steadily growing in China, Brazil and India. UPS would also be taking out a European rival that has shown a willingness to undercut competitors on price.

However, the Dutch package delivery firm, the smallest of the four world leaders in sending goods and documents swiftly around the globe, faces tough price competition on its key routes, a recession in its core European market, and problems in Brazil, where it has struggled to integrate its acquisitions.

TNT’s revenue has declined as the weak global economy spurred customers to seek cheaper shipping options. Some analysts said it was not big enough to compete with the world’s major delivery companies.

The combined group would have a dominant position in some markets, such as Britain, and would have to divest assets, some bankers and analysts said. TNT is the domestic market leader in Europe with an 18-per-cent share, while Deutsche Post DHL is second at 15 per cent, and UPS has 10 per cent.

“It is likely that UPS will have to divest in the UK if it acquires TNT Express,” André Mulder, an analyst at Kepler Capital Markets, said.

“According to my estimates, UPS and TNT Express have a combined market share of 35 per cent in the UK. Usually competition authorities regard a market share of more than a third as critical,” he added.

Mr. Mulder said he does not expect any competition-related problems for UPS in Germany, France or the Netherlands.

“In Germany and France, UPS and TNT Express have a combined market share of about 30 per cent. In the Netherlands it is even below 30 per cent, as UPS is quite small here,” Mr. Mulder said.

The source close to the talks said that antitrust laws were a potential hurdle but not a deal-breaker. But rival Deutsche Post said on Monday it expected regulators would have concerns about a combined group.

A collective of Dutch trade unions said in a statement on Friday they would evaluate potential bids for TNT to ensure they did not lead to a loss of jobs and would guarantee operations in the Netherlands, including a headquarters in Hoofddorp on the outskirts of Amsterdam and close to Schiphol airport.

Antony Burgmans, chairman of TNT’s supervisory board, told Dutch newspaper Het Financieele Dagblad that the decision to reject UPS’s offer was about more than just price.

“It isn’t clear how the European Commissioner for Competition will view this,” he told the paper, adding that TNT wants guarantees on jobs.

Credit Suisse noted that under TNT’s articles of association, its foundation has the option to defend the company against a bid.

“However, we do not expect it to engage in such actions given our expectation of broad shareholder support for a deal,” Credit Suisse said in a research note.

TNT was spliced off from PostNL last year to try to ring-fence the more attractive express delivery operations from a traditional post business that is in decline in the age of electronic mail.

Shares in PostNL rose 46 per cent on Monday. PostNL has taken impairments of more than €700-million on its stake in recent months as shares in TNT dropped from a high of €10.20 on May 10 to a low of €4.46 on Oct. 6.

TNT’s poor performance in terms of revenue, profit and share price has led investors such as U.S.-based Jana Partners to call for a shakeup.

Jana Partners together with Canada’s Alberta Investment Management Corp. (AIMCO) has a combined stake of just over 5 per cent. It has pushed for a new chief executive officer, a stronger supervisory board and a turnaround in performance, whether as part of a bigger group or as an independent company.

So far, those investors have refrained from commenting on the UPS offer, but bankers said their response is crucial.

“I would expect them to vocally ask for a higher price, push TNT’s board to strike a deal around €9.5 to €10. One sure thing is that they clearly don’t want UPS to walk away,” said one banker.

[POSTMAN]

Brown shirts forum?

[TrueBlueTerrier]

Brown shirts forum?

Better not, the CWU would only get the wrong end of the stick and we might get a DNS attack from militant Anti-Fascists.