Northwest Arkansas Democrat-Gazette
EU to probe FedEx merger plan
Panel to study effect on competition if Dutch firm acquired
FedEx Corp. faces an indepth investigation into its bid to take over TNT Express NV just 2 ½ years after European Union regulators thwarted United Parcel Service Inc.’s attempt to buy the Dutch company.
The FedEx-TNT tie- up may cut competition in the market for small packages and lead to higher prices, the European Commission, the EU’s executive arm, said Friday.
The EU “said all along they were going to leave no stone unturned. How could they not do an in-depth review when they rejected the UPS-TNT merger?” said Kevin Sterling, an analyst with BB&T Capital Markets, who recommends holding FedEx shares. “Think of the scrutiny they gave UPS-TNT. They have to do this. They absolutely have to.”
The agreement to acquire the Dutch company for $4.8 billion would allow Memphis-based FedEx, currently No. 4 in the European market, to add vehicles, staff and customers. Those assets may help FedEx cut costs and expand its reach to take on UPS and Deutsche Post AG’s DHL.
The Brussels-based commission said the deal may leave DHL and UPS as the only rival “integrators” that control a large air and road delivery network in Europe.
“These are two very complimentary networks. If anything, it helps improve competition in Europe rather than reduce competition,” said Jack Atkins, an analyst with Stephens Inc., who rates FedEx overweight. “Ultimately this is going to be a transaction that will gain approval. But I’d expect, and we’re seeing, regulators in Europe taking a very close look at this.”
UPS aborted its own bid for TNT in January 2013 after the EU signaled that it would block the deal. Regulators argued it would limit some shipping customers’ choices for next-day deliveries to just UPS and DHL. UPS failed to find a suitable buyer for parts of TNT to ensure that competition for delivery services wouldn’t be squelched.
“We will continue to work together with TNT Express to meet the European Commission’s need for additional due diligence and are confident that the combination of both companies will increase competition and create benefits for customers,” Patrick Fitzgerald, a spokesman for FedEx, said in a statement. “We continue to make progress on all of the necessary regulatory steps around the world that would allow us to complete the transaction in the first half of 2016.”
TNT will continue to cooperate with FedEx and the commission, the Hoofddorp, Netherlands-based company said in an emailed statement. As indicated in April, “FedEx and TNT expect the transaction to close in the first half of 2016.”
TNT shares dipped
as much as 1.6 percent in Amsterdam trading. FedEx shares rose 15 cents to close Friday at $171.42.
The commission set a Dec. 8 deadline to rule on the FedEx-TNT deal.
“Many businesses, and in particular e-commerce, rely heavily on affordable and reliable small package delivery services,” Margrethe Vestager, the EU antitrust commissioner, said in a statement.
Regulators need to “make sure that FedEx’s takeover of TNT would not impede effective competition and would not lead to higher prices for consumers,” she said.