The takeover of UK Mail by Deutsche Post will pit the German postal giant head-to-head with the Royal Mail for a share of British parcel deliveries.
The Germans are coming for UK parcel deliveries...
Sell Royal Mail. That’s the advice of broker Liberum in the wake of the Deutsche Post’s (ETR:DPW) agreed £243mln takeover of UK Mail (LON:UKM).
Liberum said the takeover will pit the German postal giant head-to-head with the Royal Mail (LON:RMG) for a share of British parcel deliveries.
“UK Mail competes with Royal Mail in bulk letters and parcels,” said the broker in a note to clients.
“We would expect it to become a much more powerful competitor with the backing of a much larger, financially stronger and ambitious owner.”
The market was certainly taking quite a bearish stance on Royal Mail, marking the stock down almost 3% at 489.7p.
However Liberum thinks the shares are worth as little as 320p each.
By contrast UK Mail investors must be tickled pink by the Deutsche Post bid, which was pitched at 440p a share, a 43% premium to last night’s closing price. Oddly UKM shares nudged 0.5p above that level in early afternoon trade.
Cost-cutting and consolidation has been taking place across the industry, with the last big deal being FedEx’s £3.8bn takeover of TNT of the Netherlands.
The Germans are coming
At the moment the UK parcel delivery is dominated by the 500-year-old Royal Mail.
The once state-owned institution already competes with Deutsche Post in the rest of Europe through its General Logistics Systems arm, but the takeover brings the competition right to its doorstep.
King in its home market, Deutsche Post is now looking to expand across Europe as it taps into the growing demand for non-express delivery from online shoppers.
The takeover of UK Mail will add 50 UK distribution centres and a fleet of 2,400 delivery vans to its British operations.
In January, Deutsche Post bought a stake in French courier Relais Colis SAS and has already scooped up a number of postal operations across 16 regions in Europe.
However, Cantor Fitzgerald’s Robin Byde reckons the competitive impact would remain modest for the next 12-18months.
The Royal Mail declined to comment.