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UPS will accept lower share in Europe

By control on November 30, 2012

UPS officials have told the European Commission that they are prepared to sell TNT Express assets in several countries to reduce their market share, as the necessary price of securing approval to acquire their European rival. Company executives also promised to open up their expanded air network to third parties.

The company was obliged to submit its proposals by midnight Thursday. The EC will now consider these before deciding whether to permit UPS’s €5.2 billion takeover. Its verdict is not now expected before February.

UPS first announced that it wanted to acquire TNT in March. The regulatory review period has already been extended twice. Initial investigations by the EC showed that the merged group would reduce competition in international parcel delivery across most of Europe. It would compete only against DHL in a number of markets where FedEx — which strongly opposes the acquisition — is not well established.

The EC issued a Statement of Objection to UPS and TNT in October, and Competition Commissioner Joaquín Almunia said “substantial remedies” were needed to ensure the European express market remained competitive.

TNT’s offer last month to sell TNT Airways and Spanish carrier Pan Air Líneas Aéreas to ASL Aviation Group was a first move in this direction. However, shareholders warned in the wake of that announcement that the takeover could lose its rationale if UPS was forced to sell off too much of TNT. At some point, one stakeholder commented, UPS would simply walk away. After all, TNT would be a welcome addition to the company’s portfolio, but not an essential one.

Under the airline transfer, which is conditional on the UPS-TNT merger going ahead, ASL would continue to operate all TNT Express routes for the combined organization, and TNT’s European air hub in Liège, Belgium, would be unaffected for at least a year.

After that, ASL would have to bid to retain the combined group’s outsourced air business in Europe, although the number of competitors able to take on such a massive contract has shrunk in recent months with a number of operators leaving the sector.

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