Brussels must explain why EU failed to deliver UPS-TNT deal
When America’s United Parcel Service rolled up last March with a £4.3bn bid for Holland’s TNT Express, you could sense the relief. Here was a major US corporate putting proper folding stuff on the line for a European company – despite the hourly provocations from the warring eurozone.
It was, what is popularly known, as a vote of confidence. Well, not any more. UPS has pulled the bid – a pricey decision too, given it now has to pay a €200m (£166m) break fee. TNT shares have collapsed 41pc. And all because of Brussels’ quaint view of what today constitutes a logistics market.
EC competition commissioner Joaquin Almunia never got his head round this deal. He stubbornly stuck to the belief that, when it comes to the go-go world of parcel delivery, only four companies count – UPS, Deutsche Post’s DHL, FedEx and TNT. Sure, on that basis, the deal turned four groups into three – but that says more about the EC’s narrow view of the market than what’s happening on the ground.
As your Christmas parcels showed, it’s not just the big four that deliver. What about the Royal Mail or DPD, the parcel firm controlled by France’s state-owned La Poste? Or the tens, if not hundreds, of smaller delivery firms across Europe?
Almunia argued it’s only the big four that have integrated networks, notably with an air freight wing. But, even after the proposed deal, DHL would have been a bigger integrated player in Europe than UPS-TNT, with 28pc of the market versus their 26pc. What’s more, UPS revised its bid three times, offering the asset sales demanded to turn DPD into a more powerful competitor. Meanwhile, TNT Express undertook to sell its airline to satisfy Brussels.
All to no avail. On Friday, after meeting the EC wonks, UPS got knocked back again – this time apparently also told that there could be no extension to the Feb 5 decision deadline, so it was too late to suggest any more remedies.
The upshot is that TNT, which employs 70,000 staff, now looks even more vulnerable, whatever its claims it will just revert to an independent strategy – one that was hardly working before. And the shares are half the €9.5 bid price, below where they were too before UPS showed up.
TNT’s 30pc shareholder PostNL now plans to sell its stake, which in the absence of a bid will only create a stock overhang. Of course, FedEx, which opposed the UPS tie-up and is just a bit player in Europe, could be waiting in the wings. But, with hardly any European business, FedEx cannot match the £400m or so of synergies analysts pencilled in for the UPS deal.
Come Feb 5, Almunia will no doubt claim he has saved businesses and consumers from a so-called European duopoly of UPS/TNT and DHL. But Brussels has come up with this sort of thinking before. It blocked mergers in the package holiday and music businesses, for example, only to relent years later – when the market had moved on and the one-time industry leaders had been left behind.
Asked to explain the EC’s thinking, Almunia’s spokesman demanded all questions by email. Sadly, it’s too late for that. They’re already in the post, coming via TNT.
Debt Ceiling – the White House’s sequel to Fiscal Cliff
Even Hollywood would struggle to produce a sequel this quick. Just when you thought you’d had all you could stomach with the Fiscal Cliff epic, here comes another blockbuster from the same White House studio: Debt Ceiling.
Barack Obama had some familiar lines yesterday, telling Republican lawmakers that he expected no nonsense from them over the need to raise the ceiling on America’s $16.4 trillion (£10.2 trillion) borrowings.
They would “not collect a ransom in exchange for not crashing the economy”, the US President declared, as he drove home the chaos of not lifting the debt bar. The markets “could go haywire”, he said, while America floundered around trying to make social security payments or deliver salaries to the military.
Put like that, the cinematic potential of failing to raise the ceiling looks rather promising – though Obama doesn’t see things that way. After all, he’s trying to run a country whose Treasury reached its statutory debt limit on December 31 and is now using “extraordinary” measures to keep the show on the road. According to the Washington-based Bipartisan Policy Center, America will run out of funds to pay all its bills by Feb 15, which points to a frugal Valentine’s Day dinner for Michelle.
Like the written Constitution, the debt ceiling at least allows Americans to know where they stand. But when Obama insists “we are not a deadbeat nation”, you wonder who exactly he’s trying to convince.
This Bumi “relationship agreement” could be tested to destruction
What do you have to do to invalidate a shareholder agreement?
That will become clearer soon as Nat Rothschild and Bumi slug it out for control of the bombed-out coal miner. Indonesia’s Bakrie family, who created the financial black hole with Rothschild, insist that a “relationship agreement” allows them to appoint the London-listed company’s chairman, chief executive and chief financial officer. So, they claim, Rothschild can’t appoint his chosen directors – even if he wins next month’s EGM seeking to oust 12 of the current 14-strong board.
The financier will test that. He claims the “irregularities” shortly to be laid at the Bakries’ door by law firm Macfarlanes, plus an undeclared concert party, make the agreement legally worthless. Some big shareholders seem to agree too, with 3.1pc investor Taube Hodson Stonex Partners reportedly lending its support to Rothschild, alongside 4pc investor Schroders – though neither commitment is binding. Meanwhile, Rothschild is upping his own stake to boost his EGM chances. Amid such fraught relations, it looks tricky to make this agreement stick.