It looks like United Parcel Service's proposed deal to buy European package giant TNT Express will not go through, after the European Commission informed the two companies that it is working on a decision to prohibit the proposed acquisition.
UPS announced last March plans to acquire Dutch package company TNT Express for 5.16 billion euros or $6.8 billion. It would have been UPS' biggest purchase to date.
The combined UPS-TNT entity would have had an estimated 25% to 30% market share of the European small package market.
UPS submitted an initial remedies proposal on Nov. 29, 2012, and subsequently revised the proposal twice.
Upon prohibition by the EC, UPS will pay TNT a termination fee in the amount of EUR 200 million, or about $267 million U.S., and will withdraw the offer.
Peter Nesvold, a transportation investment analyst with Jefferies & Co., noted in an email to investors that one of the key sticking points was that UPS/TNTE were not able to find a buyer for certain assets that needed to be sold off in order to meet the EC's competition requirements.
"In essence, FedEx, who was the most likely buyer of those assets, did not get involved, and indirectly helped the deal fall through," Nesvold writes.
"We are extremely disappointed with the EC's position," said Scott Davis, UPS Chairman and CEO, in a statement. "We proposed significant and tangible remedies designed to address the EC's concerns with the transaction. The combined company would have been transformative for the logistics industry, bringing meaningful benefits to consumers and customers around the world, while supporting growth in Europe in particular."
3/20/2012 UPS to Buy European Package Co. TNT Express for $6.8 Billion