Black Eye for Big Brown

On January 14th, “Big Brown”, as UPS is nicknamed in the U.S., announced it won’t proceed with its intended deal with TNT Express.  Although the decision from the European Commission is not yet finalized, but expected in the next weeks, it can be taken as certain that the 5.2 billion bid will be stopped by the EU Commission’s Directorate of Competition due to its concerns about imbalance in competition and consumer protection.

The failed merger is bringing TNT Express a 267 million EUR ‘windfall’ termination fee payable by UPS, but on January 14th it also brought an immediate loss of 49% of its stock value, immediately after the UPS announcement.

The momentary winner in this stopped deal seems to be  Deutsche Post/DHL, which  loses the threat of a new and strong competitor in the market, after having a few years ago had to bury its own expansion plans to the U.S. market,  when it lost over 7 billion EUR there.  This German logistics giant, with sales of 39 billion EUR in the parcel segment in 2011 alone, now has its chance to gain a new and extended basis for intensifying its business for international  express deliveries and parcels.

In this new situation, it still has to be seen, how much protection can be gained for consumers and for the idea of free competition within the European Market.

Petra Braun-Boghos, Legal Consultant