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FedEx chief throws cold water on talk of TNT bid
FedEx Corp. Chairman, President,
and CEO Frederick W. Smith has
effectively ruled out any chance that
FedEx would counter rival UPS
Inc.’s $6.8 billion buy-out offer for
European parcel carrier TNT
Express, saying FedEx has enough
resources and momentum to succeed in Europe on its own.
Speaking March 22 to analysts as
Memphis-based FedEx reported its
fiscal year 2012 third-quarter
results, Smith said Europe remains a
“big part of the FedEx network” and
that the company is “confident in
our plans to continue expansion,
primarily through organic growth.”
Smith said the European opera-
tions of its FedEx Express air and
ground unit are “profitable” and
“growing strongly.”
Smith declined comment on any
specific plans regarding TNT
Express, citing corporate policy that
forbids comment on what FedEx
refers to as “corporate development
matters.”
STUMBLING BLOCK REMOVED
Smith’s comments may remove the
one potential stumbling block to
Atlanta-based UPS’s completing the
largest acquisition in its 105-year
history. On March 19, UPS and
Dutch-based TNT Express
announced they had agreed on a
$6.8 billion buy-out, a $400 million
boost from UPS’s initial offer in
mid-February. The addition of TNT
would increase UPS’s share of the
intra-European parcel market,
mostly for ground deliveries. It
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would also elevate UPS’s footprint in Latin
American and Asia-Pacific markets where
TNT Express has a presence.
DHL Express, the market leader in
Europe, has remained silent on the developments. Most observers believe DHL will
stand aside for fear that a combination with
TNT Express—which vies with DHL for
parcel leadership in Europe—will draw the
interest and ire of European antitrust
authorities.
As for the various carriers’ stake in the
European market, estimates vary depending
on the source. Analysts at Milwaukee-based
investment firm Robert W. Baird & Co. estimate that DHL has 38 percent of the intra-European parcel market, followed by UPS
with 23 percent, TNT Express with 18 percent, and FedEx with 10 percent. St. Louis-based firm Stifel, Nicolaus & Co. estimates
that TNT Express has about 18 percent of
the market, followed by DHL with slightly
less than that, UPS with about 10 percent,
and others, including FedEx, accounting for
the balance. New York investment firm
Wolfe Trahan & Co. said TNT leads with 18
percent of the intra-Europe market, followed by DHL with 16 percent, UPS with 14
percent, and FedEx with 10 percent.
The European parcel market is made up
of four categories: domestic intra-country,
pan-European ground, intra-European air,
and intercontinental air. Smith said that,
compared with the U.S. shipping market,
Europe is much more “fractionated,” especially in domestic country markets, which
are heavily populated with mom-and-pop
operators. Such an environment makes for
tougher competition but also could help
larger companies like FedEx gain share of a
fragmented market.
Smith said FedEx remains strong in the
intercontinental and the intra-European air
segments. The company has added 23
European stations in the past five months
and has positioned more freighters in
Europe to provide later pickups and earlier
deliveries to customers shipping within and
outside the continent, according to company executives. ;
