TNT Express in Talks to Sell Unit to Finalize Takeover by UPS
Talks to Sell Unit to Finalize Takeover by UPS - WSJ.com
Dutch package-delivery company TNT Express NV TNTE.AE +2.86% is in
talks with at least two bidders to sell its airline unit as part of its effort to finalize a takeover by United Parcel Service Inc. UPS +3.03%
The talks are at an advanced stage, but they're complicated by concessions UPS and TNT Express may have to make to win approval from European competition regulators, according to people briefed on the discussions.
UPS has already said that TNT Airways needs to be sold before it closes the acquisition of the parent company to comply with airline-ownership rules.
TNT Airways operates a fleet of 28 aircraft from its hub in Liege, Belgium, according to Ascend, an aviation consultant. Most are cargo jets providing long-haul services to Asia and shorter flights throughout Europe to support its parent's package-delivery business.
Potential buyers are being asked to continue providing UPS with service for a year after the close of the company's planned takeover of TNT Express, according to the people briefed on the situation.
They would also have to provide commitments to lawmakers in Wallonia, the southern region of Belgium where Liege has been built into a major logistics center.
Potential buyers include private-equity firms and General Logistics Systems, an Amsterdam-based delivery company controlled by the U.K.'s government-owned Royal Mail Group. GLS declined to comment.
TNT Express said it is talking to interested parties and that a solution needs to be in place when the UPS deal closes. It also confirmed that the airline unit would need to continue providing it with air service.
Scott Davis, UPS's chief executive, reiterated Tuesday that he expected the TNT Express deal to close despite the competition concerns raised last week by EU regulators.
"We're confident we'll get clearance, and we'll get it early in 2013," Mr. Davis said on a conference call after UPS reported a drop in third-quarter profit.
The company said its overall package volume rose 2.9% in the quarter, but soft international trade and more lightweight shipments linked to online shopping dampened results. A big charge stemming from pension restructuring also hurt.
UPS reported a third-quarter profit of $469 million, or 48 cents a share, down 56% from $1.07 billion, or $1.09 a share, a year earlier. Excluding items such as the pension-related charge, adjusted per-share earnings were $1.06 in the most-recent quarter. Revenue was down 0.7% to $13.07 billion. Analysts polled by Thomson Reuters had most recently forecast earnings of $1.06 a share on revenue of $13.31 billion.
The company agreed in March to buy TNT Express for about 5.16 billion euros ($6.73 billion) in an effort to expand its market position in Europe. They had hoped to close a deal by the third quarter, but EU competition officials expressed concern about the impact of reducing the number of companies that control pan-European parcel-transport networks to three from four.
The effort to sell TNT Airways comes as the first-half recovery in global air cargo demand appears to be stalling, according to the International Air Transport Association.
Mr. Davis said the European market for small-package deliveries had remained relatively robust despite the increase in economies in the region moving into recession.
UPS shares were recently up 3.2% at $73.81, with TNT Express 2.9% higher at €8.14.
Last edited by edie; 24th Oct 2012 at 00:05.