Package delivery company United Parcel Service Inc. (UPS: Quote) is close to buy Dutch rival TNT Express NV after sweetening its bid to about 5.2 billion euros or $6.8 billion, according to media reports on Sunday. The two companies are expected to announce a deal as early as on Monday.
UPS now plans to pay 9.50 euros per share for TNT, up from its prior offer of 9 euros per share and its initial offer of 8.25 euros per share made last year. The proposed deal will be the largest ever by UPS in its history and is reportedly expected to generate about 500 million euros in synergies.
UPS' largest acquisition to date is its $1.2 billion purchase of Overnite Corp., a trucking company, in 2005. UPS had about $4.2 billion of cash and short-term investments as of December 31, 2011.
UPS is said to have agreed to a reverse breakup fee of about 3 percent of the deal's value, in the event the deal is rejected on antitrust grounds.
An acquisition of TNT would enable UPS to expand in Europe, where Deutsche Post DHL (DPSTF.PK,DEUPF.PK) is the leader in express deliveries. A deal would also give UPS an edge over rival FedEx Corp. (FDX: Quote) in Europe.
UPS made a bid on February 11 to buy the entire issued capital of TNT for 9 euros per share. The per share offer represented a 42 percent premium over the 6.34 euro per share at which TNT's stock closed on February 10.
TNT said its board considered the UPS proposal and subsequently rejected it. Nevertheless, Europe's second-largest package delivery company added that it would continue talks with UPS.
However, talks between the two companies reportedly slowed down last month due to differences over matters related to personnel and location of the companies' combined operations.
UPS said in mid-February that it acquired Kiala, a firm based in Brussels that provides convenient delivery options to busy consumers purchasing goods over the Internet. Terms of the deal were not disclosed. UPS said the acquisition will broaden its service portfolio for business-to-consumer deliveries.
TNT, which has been facing pressure from shareholders to explore strategic options, has been seen as a takeover target for either UPS or FedEx for quite some time now. FedEx was expected to make an offer for TNT after the UPS bid was rejected, but has so far not made an offer.
In mid-February, TNT reported a loss for the fourth quarter, reflecting weaker economic conditions and impairment charges at its Brazil operations.
The results came shortly after the company's rejected the UPS takeover bid.
TNT split from Dutch mail company PostNL (PNLLY.PK) in May 2011, as shareholders pressured TNT to shake up its board and boost shareholder value.
Currently, PostNL is the largest shareholder in TNT Express with a 29.9 percent stake and has taken impairments of more than 700 million euros on its stake in recent months.
UPS closed Friday's trading at $78.41, down $0.53 or 0.67 percent on a volume of 4.61 million shares.
by RTT Staff Writer
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