UPS’ decision to pull out of the $6.3bn takeover – due to a failure to offload part of its European business – was a shock to investors and prompted an almost-50 per cent plunge in TNT’s share price.
The deal would have given UPS control of about a fifth of Europe’s roughly $50bn parcel delivery market and provided a useful bulwark against its main rival FedEx, which leads UPS in the US but has only a marginal presence in Europe.
So, good news for FedEx, which had unsurprisingly raised competition objections. It also facilitated the takeover’s collapse by refusing to purchase those pieces of the business that UPS and TNT needed to sell to satisfy antitrust authorities.
Another, perhaps bigger, beneficiary is Germany’s DHL, which would have seen UPS draw level with it in Europe had TNT’s 47 aircraft and 26,000 trucks been added to UPS’ transport infrastructure.
But consequences such as those have prompted some to accuse the European Commission of protectionism. After all, a 20 per cent slice of any market doesn’t exactly smack of domination.
Concerns had been voiced by the Competition Commission that the tie-up would leave Europe with only two or three freight integrators – those that provide land and air delivery services – but TNT’s precarious position without a major investor could ensure that happens anyway.
Given FedEx’s small share of the European market, a bid from it for TNT would no doubt satisfy regulators, but the US company has less cash to splash than UPS and is in any case preparing a multi-billion-dollar cost-cutting programme.