US logistics company UPS is in talks with TNT Express about a possible takeover, after the Dutch delivery company rejected an approach valuing it at about €4.88bn.
After many years of speculation about a tie-up between the two, TNT Express said on Friday that UPS had submitted an unsolicited non-binding and conditional offer for the Dutch delivery worth €9 a share, valuing it at €4.88bn.
The talks have been going on for months and the all-cash offer had been increased to €9 a share, people familiar with the situation said.
In reaction to TNT’s statement, UPS said it made “a revised, increased and comprehensive proposal to acquire the entire issued share capital”.
TNT Express, which faces pressure from shareholders after a drop in its share price, said it had rejected the offer but it continued to be in discussions about a possible takeover for the whole of the company.
TNT Express shares were up 2.9 per cent before the announcement at €6.36 on Friday afternoon in Amsterdam.
The deal, if successful, would highlight interest by global companies in taking advantage of the fall in European share prices in the wake of the sovereign debt crisis, which has depressed valuations of coveted targets.
The combination would increase UPS’s presence in Europe but would also give the US company a domestic network in China, where it has been keen to expand.
FedEx pursued TNT in 2008 and it declined to comment Friday on whether it would enter the bidding.
“The market will hope that FedEx (is) also tempted in but very hard for FedEx to compete with UPS, who are the bigboy here,” said Mark Kelly, analyst at Olivetree Securities.
In recent days, TNT Express has been caught up in an open feud with a group of activist shareholders, led by US hedge fund Jana Partners, rejecting their request to appoint three new directors.
Jana Partners, which together with Alberta Investment Partners owns 5 per cent of TNT Express, was the driving force behind a shareholder revolt that led to the break-up of the former TNT into TNT Express and Dutch postal company PostNL last May.
With other shareholders, it is now pressing for TNT Express to be groomed for a takeover by a larger rival, such as UPS or FedEx.
When TNT Express was spun off last year, its shares were trading at about €9. PostNL holds a 29.9 per cent stake in TNT.
Several large shareholders surveyed by the Financial Times have said an offer of €9 would be acceptable to them.
Analysts at Wall Street research boutique Wolfe Trahan & Co recently called UPS and FedEx the most logical buyers of TNT Express.
“We believe the separation of Express from Mail earlier this year could finally entice a strategic buyer to emerge,” they noted in a report. “We now estimate a €9 to €10 takeout price in our buy-out analysis, down from our prior expectations of €10 to €11.”
TNT in recent months warned on profits, citing low demand on Europe-Asia routes, cost-conscious customers in Europe and continued losses in the Americas.
Earlier this week, UPS announced its planned takeover of Kiala, the Belgian ecommerce company, which was estimated to be worth about $100m.
Additional reporting Matt Steinglass and Jeremy Lemer
Get alerts on United Parcel Service Inc when a new story is published