UPS trumps FedEx in race to buy TNT

UPS

The Dutch delivery company TNT NV may fall into the hands of its US rival United Parcel Service (UPS), following FedEx’s short-lived attempt to acquire the European company.

 

Early this week, Britain’s Sunday Telegraph reported that UPS was planning a $17 billion bid for TNT, which resulted in the wild fluctuation of TNT’s share price.

Speculation over the UPS talks followed last month’s report on FedEx’s interest in acquiring TNT. Independent research company Datamonitor has previously suggested that FedEx intended to buy the European company to counter a negative outlook in the US market.

FedEx has reportedly abandoned the bid.

While both parties are declining to comment on the possibility of mergers, president of UPS’s international business Dan Brutto told Reuters that UPS was consistently looking “at different things and try to fit [them] into the puzzle.”

However, he added acquisition was not under the company’s immediate attention.

UPS has a market value of over USD 66 billion, while that of TNT is estimated at around USD 14 billion.

Analysts said TNT’s express delivery unit, which comprises over 60 per cent of sales with economic resilience, is the key attraction for international players who intend to expand their European market penetration.

In Europe, UPS and its US rival FedEx are estimated to have less than ten per cent market share, while TNT holds 24 per cent.

“Operationally, TNT has a very extensive and inexpensive road network, which is a key advantage versus the more air-focused networks of FedEx, UPS and to come degrees also DHL,” ING analyst Axel Funhoff said.

Express freighters flock to rail

FedEx Express.

Express freighters are increasingly choosing rail over air transport.

The long-buried potential of rail is at last to be realised with the help of the global express delivery industry, a market analyst has argued.

Datamonitor’s transport logistics analyst Sraavani Rao said large swings in oil prices, coupled with the economic downturn, were leading to a gradual shift in customer demand away from express and parcel delivery services via air to rail and road.

She argued key international players such as DHL, TNT, UPS and FedEx were seeing the rail network as a competitive alternative with service capabilities as well as economic and environmental benefits.

Express operators, especially in the European market, are increasing the use of the rail sector, already offering services through rail to serve same-day and next-day delivery requirements.

US player FedEx is also planning to team up with the French rail network in a bid to provide time-definite rail deliveries and help cut reliance on air networks for domestic and international deliveries within the EU.

This is also expected to streamline critical overnight express deliveries, as rising noise concerns at the airports continue to put more pressure on operators, according to Ms Rao.

She pointed out rail seemed to be a more viable option than road as congestion charges in some capital cities would make road transport on certain occasions costlier than rail.

“Additionally, rail transport makes environmental sense, as the emission levels are significantly lower than those of road,” she said.

She said the shift favouring rail transport over road and air would become more salient in the medium to long term.

“An alternative mode of transport that offers great potential is rail, as most companies come to realise the potential of rail express delivery.

“This is expected to increase the share of rail in the modal mix of transport in the years to come and also provide opportunities for express companies to both compete effectively and satisfy shippers’ requirements,” Ms Rao said.

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