The European Commission took the position regarding a United Parcel Service Inc. (NYSE: UPS) buyout of TNT Express that the rules are the rules, at least in so far as their officials see them. Its interpretation of antitrust regulations have prevented the deal from consummation. TNT will suffer tremendously from the broken plan. Jobs will be lost. A large European company will be put onto the ropes. That is hardly what a region desperate for recovery needs.
Upon prohibition by the EC, the Offer Condition relating to EU Competition Clearance will not be fulfilled and UPS will pay TNT a termination fee in the amount of EUR 200 million and will withdraw the Offer.
The fee is barely enough to do much for TNT's troubled finances. To make matters worse for the European company, UPS indicated it would quickly compete with rivals in the region, which presumably now includes TNT.
UPS added in its comments about the deal:
Scott Davis, UPS Chairman and CEO said "Looking ahead, our company focus will be on the continued execution of our growth strategy. While we viewed the acquisition as a compelling growth platform, our financial strength allows UPS to capture future opportunities."
Not only is TNT weak, based on its past numbers. It will be made weaker by the cessation of a buyout process that will force it to reignite its business, if it can. UPS and other large shipping firms, led primarily by FedEx Corp. (NYSE: FDX), will press their distribution and balance sheet power to take as much share from TNT as possible.
The concerns about TNT's future were immediately reflected in its stock price, which fell by half once word of the busted $6.9 billion UPS transaction reached the market.
TNT has more than 77,000 workers. Its adjusted revenue dropped by 2% in the third quarter. Measured on the same basis, operating income dropped 12%. TNT offered no guidance, for obvious reasons. But its share price collapse showed what the market thinks of future prospects.
In a region of the world that needs job growth and corporate revenue recovery, the EC has made sure that TNT's prospects will be thrown into reverse.
Filed under: 24/7 Wall St. Wire, Mergers & Acquisitions Tagged: FDX, featured, UPS