Back to the Drawing Board for Disappointed TNT Express and UPS

While in the middle of January it had seemed clear that the European Commission was going to block the acquisition of TNT Express by United Parcel Service (NYSE:UPS), the EC didn’t release an official decision until Wednesday, when it met the expectations it had set.

The acquisition would have meant big things for both UPS and TNT.

For UPS, acquiring TNT Express would have boosted its operations within Europe, Asia, and Latin America. Adding TNT Express’s network would have been a step forward in global logistics for UPS, and could have increased UPS’s 10 percent European market share to a 28 percent share and shifted the company’s European revenues from 26 percent to 36 percent of total sales.

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For TNT, the acquisition seemed almost like an expected next-step for the company. After UPS made the offer to acquire TNT, the latter’s chief executive left the company. TNT’s own market share is also believed to have eroded during acquisition talks with UPS, leaving the company in a worse state than when negotiations began…

The EC had been overseeing the deal closely, but did not find UPS’s compromises satisfactory in the end. UPS had offered to sell off some of TNT’s operations in numerous countries, but that wasn’t enough to satisfy the EC. Much of the EC’s concern seemed to be related to the deal reducing competition and harming consumers, as the EU Competition Commissioner Joaquin Almunia said the deal “would have drastically reduced choice between providers and probably led to to price increases.”

Now, UPS has to go back to the drawing board to find an alternative means by which to increase its global positioning, possibly considering natural growth or smaller profile acquisitions. TNT also has to do some rearranging, as it has to recover from the loss of its former chief executive and may not expect another acquisition offer too soon.

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