The UPS/TNT Express deal

– will it ever happen?

In May, we discussed the UPS bid for its smaller Dutch rival TNT Express. With such acquisition, worth 5.2 billion Euros, the whole market of small parcel deliveries in Europe could be re-shaped and concentrated, and competition in this market segment could be either intensified or blocked by such major buy-out.

It was the concern about potential lack-of competition brought the European Commission to the preliminary conclusion to open an in-depth investigation into the intended deal, pointing out that the market for small parcel delivery services and in particular for international express services could be dominated by one player with overly high market share.

Although the two companies gave a joint statement saying that such objections were a  „normal step“ for the European Commission in reviewing the intended merger and that the joint venture would not diminish, but rather increase competition in the European market, in October Brussels officially objected to the UPS and TNT merger repeating that such merger would leave customers in some parts of Europe with too little choice.

But this does not mean that the Commission has put a definite halt to this acquisition. In its most recent statement, the directorate of competion within the Commission pronounced its deadline for a final decision as 5 February 2013. In the meantime, the two companies will have to work to abolish some major obstacles that prevent the deal to go through:  TNT Express will have to sell its airline, as EU aviation rules do not allow an American company – which TNT will become when being bought by UPS – be the owner of a European-based airline. So the ball that was started by a deal on small parcel deliveries has now already rolled into other areas of the transportation-market.

As we already said in our May blog, this UPS/TNT deal will bring movement in the European freight market. It will be interesting to see how and where this merger will get finalized and what consequences will develop from it.

Petra Braun-Boghos, Legal Consultant