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Why the FedEx-TNT deal will succeed
FedEx (FDX)is confident it will successfully take over Dutch peer TNT Express (Euronext Amsterdam: TNTE-NL) following a failed bid by rival United Parcel Service (UPS) (UPS) three years ago, the global courier service told CNBC on Tuesday.
"UPS had a different level of concentration of position in the market than FedEx does, so we're very comfortable that our position in the market with TNT does not create an issue from a competitive standpoint," explained David Cunningham, executive vice president and chief operating officer of FedEx Express, at the Asia-Pacific Economic Cooperation (APEC) CEO Summit.
Announced in April this year, FedEx's $5 billion acquisition of TNT could create Europe's second-biggest delivery services business, according to Reuters.
Last month, FedEx and TNT announced that their deal faced no backlash from European antitrust regulators -a stark contrast to 2012 when UPS made its own offer for the Dutch firm.
Back then, worries about competition forced European regulator to reject the Atlanta-based package delivery firm's $6.7 billion bid for TNT. Under UPS' proposition, the combined entity would have controlled more than 30 percent of the European international express market, versus just 17 percent under FedEx's deal, Reuters reported this year.
"We've made a lot of progress in terms of the deal and approval process. We expect to close approvals in the first half of 2016. The TNT board of directors recently authorized the transaction and the E.U. has issued a statement of no objections to the deal," Cunningham said, adding that the new entity would offer "tremendous value" to customers.
The European Commission is expected to announce its final decision by January next year.
If approved, FedEx stands to greatly benefit.
"Pending European Commission approval, FedEx's market share in Europe is estimated to surpass that of UPS' in some European countries and most importantly will provide FedEx a pan-European road network that will prove beneficial in the growing cross-border e-commerce market," said John Haber, CEO of financial consulting firm Spend Management Experts, in a note earlier this year.
However, challenges still remain.
"Once it [FedEx] receives the expected approval from government regulatory bodies, the integration process will be long. UPS, DHL and others will take advantage of the situation and launch campaigns to steer customers away from FedEx and TNT Express not only in Europe but likely elsewhere including the U.S," Haber warned.
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