FedEx said Tuesday it reached a conditional agreement with TNT Express' management on an all-cash offer of eight euros ($8.75) per TNT share. That represents a premium of 33 per cent over the shares' April 2 closing price, the companies said.
FedEx Corp. chairman and CEO Fred Smith said on a call with analysts that his company had built an air-express business in Europe but wanted a ground network. Buying TNT allows FedEx to take advantage of growing Internet commerce and position itself for better long-term growth in profit, he said.
The deal is expected to close in the first half of 2016, pending shareholder approval. Dutch postal company PostNL, which owns a 14.7 per cent stake in TNT Express, said it supports the bid.
In midday trading, shares of FedEx rose $4.94, or 3 per cent, to $171.61, and U.S.-traded shares of TNT jumped $1.69, or 25.8 per cent, to $8.24.
The deal comes two years after United Parcel Service Inc. dropped its own 5.2 billion-euro takeover bid for the Dutch company, citing objections by European Union regulators worried about the combined company becoming too dominant.
TNT Express and FedEx said they are confident that anti-trust concerns can be addressed.
TNT Express CEO Tex Gunning said that while his company did not solicit the takeover bid, "we truly believe that FedEx's proposal, both from a financial and a nonfinancial view, is good news for all stakeholders."
FedEx has made recent, smaller acquisitions. In January, it closed the $1.4 billion purchase of Genco Distribution Systems, which handles product returns.
Buying TNT "will catapult FedEx into a dominant player in the European market," analyst Helane Becker of Cowen and Co. wrote in a note to clients. She said that with low interest rates, the cheap euro and rival UPS' own restructuring, FedEx's timing was excellent.
Becker said UPS' strength in ground deliveries had led European regulators to block it from acquiring TNT in 2013, but FedEx is smaller in the European ground market, giving it a much better chance of winning regulatory approval.
The $4.8 billion price is much less than FedEx would have spent building a similar European network on its own, said S&P Capital IQ analyst Jim Corridore.
FedEx is based in Memphis, Tennessee, while TNT Express is headquartered in Hoofddorp, in the Netherlands.Suggest a correction