UPS Garbles Delivery Of TNT Lines - Forbes.com
UPS Garbles Delivery Of TNT Lines
Lionel Laurent, 08.11.08, 3:35 PM ET
LONDON -
Shares of the Dutch mail company
TNT had a very volatile Monday, after
United Parcel Service's head of international operations was
mistakenly reported to have poured cold water over hopes of a takeover bid.
Shares of
TNT (other-otc:
TNTTY -
news -
people ) closed down 1.0%, to 25.11 euros ($37.41), in Amsterdam, after initially rising on reports that it was in discussions with American rival
UPS (nyse:
UPS -
news -
people ). But according to
TradeTheNews, the chief executive of UPS International said that buying a company would "devalue" its own shares.
A UPS spokesperson contested the quote, which first appeared in a Reuters report published at around midday. She would not say why or how the executive, Dan Brutto, had been misquoted; in any case, the dramatic 11.1% plunge in TNT shares during midday trading was all but recovered by market close.
Later, Reuters withdrew the article, saying it "accepts that the UPS executive was not commenting specifically on reports that TNT and UPS were in talks."
This is not the first time the Dutch firm has been linked to an American rival. TNT's stock had a particularly wild July, jumping 43.6% in two weeks, on rumors of interest from
Federal Express (nyse:
FDX -
news -
people ). TNT shares are now down 28.7% from their peak last year.
"From a fundamental view, TNT is worth more than 30.00 euros ($45.06) per share," said Phillip Scholte, analyst with Rabo Securities, adding that a takeover premium could push an offer into the territory of 41.00 to 42.00 euros ($61.59-$63.07) per share. That would value the company at around 15.0 billion euros ($22.5 billion)
.
That price gap may be the very obstacle that prevents a deal with either TNT or FedEx, despite the strategic logic behind such a tie-up. Both UPS and FedEx issued quarterly profit warnings this summer, showing the two companies were struggling with record fuel costs and a significant downturn in the American economy.
Although TNT has strong European exposure and has resisted commodity prices better by focusing on road transport rather than air freight, it may not want to sell itself at a time when potential buyers are not looking to overspend on an acquisition. (See
"FedEx's Face Saver.")