EC raises objection to UPS-TNT merger

10/23/2012

The European Commission has officially objected to the €5.2 billion merger between UPS and TNT Express.

A Statement of Objection (SO), was received by the US and Dutch logistics groups late last week. 

The operators said they had been expecting such a move by the EC, following a statement in the the summer by Joaquín Almunia, the EC Competition Commissioner that the merger would be subjected to an extra stage of review, over concerns that the tie-up would unbalance competition in the international express small package market in Europe.

The two companies said: “The SO is a normal step in a second-phase merger procedure. It is a confidential document that sets out a provisional position of the Commission and does not prejudge the final outcome of the case. 

“UPS and TNT Express will respond to the EC within a couple of weeks, and intend to preserve the confidentiality of the document and discussions in line with common practice.

“UPS and TNT Express believe competition in Europe continues to be significant, coming from
multiple players who offer similar services. The combined company will help create a more
efficient logistics market, thereby improving the competitiveness of Europe and the solutions
offered to businesses and consumers. 

“Those benefits include future improvements to e-commerce to help achieve the EU objective of a Digital Single Market.

“In addition, customers and consumers will benefit from a broader portfolio of services and better global access, along with lower supply-chain costs overall and improved service levels in terms of timing and reliability.

“UPS and TNT Express have worked closely with the European Commission during this process,
and look forward to continuing open and constructive discussions as we work to complete the
transaction in early 2013.”

Management at TNT Express accepted UPS’s offer of €9.50 per share in March, but its shares have since fallen to below €8 on fears the deal will not go through.

The EC has given no indication of what it might demand to allow the merger to go ahead. If there are demands that either company divest some assets to increase competition, analysts say the only likely buyer would be FedEx.