FedEx’s 4.4 billion Euro ($4.8 billion,
£3.2bn) bid for Dutch parcel delivery firm TNT Express has sparked a boost in
courier company shares. It’s not only the courier industry that will benefit,
however: it is customers that should ultimately be the real winner. The
resulting company will introduce stronger competition within Europe and
globally.
Some industry pundits are warning that the
takeover could fall foul of the EU competition authorities, in the same way
that UPS’ 5.2bn Euro bid did two years ago. However the FedEx-TNT merger
is significantly less likely to spark fears of a monopoly in Europe.
This merger will most likely succeed because
FedEx and TNT are a shrewder fit than UPS and TNT were. They complement each other
without overlapping significantly. UPS’ primary goal in seeking to take over
TNT was to build on its already substantial European business, which would have
resulted in the combined company holding an unassailable 30per cent of the European market. The FedEx TNT
merger is far less likely to fall foul of European Union competition
authorities.’
Since pulling out of domestic UK and European
markets, in 1992, then returning and taking over UK express parcels company ANC
in 2006, FedEx has struggled to build market share, and this lack of scale has
resulted in a higher cost base than its competitors. For a global company of
FedEx’s size, this lack of presence in the world’s second largest express
delivery market was a major strategic weakness and has remained its Achilles
heel. The acquisition of TNT solves this problem in one fell swoop.
The networks complement each other perfectly,
TNT was sub-scale in the America’s and parts of the Far East, where FedEx’s
network is very strong, and TNT’s strong European network will help FedEx
become a robust competitor to the dominant players, UPS & DHL. The deal
gives FedEx a lower cost base in Europe, enabling it to compete more
effectively, and acquiring TNT’s domestic operations will also help the
combined companies’ FedEx UK domestic operation, formerly ANC.
However, the huge merger might not be without
repercussions. The success of the deal relies on successful integration. This
is one of the largest ever acquisitions in the parcels market. FedEx say they
will be “aggressive” in their integration efforts, and state it will take three
to four years. What can’t be supported for any greater length of time is too
many hubs and services overlapping in the same markets. In the UK FedEx is
based at Stansted, with its FedEx UK (formerly ANC) domestic parcels hub in
Newcastle under Lyme, and TNT operates a separate hub operation in Atherstone,
near Birmingham. These operations will need to be carefully integrated to
ensure FedEx gains the benefit of scale without redundancies.
Providing that the two different businesses
can be combined swiftly and successfully the acquisition is good news for
businesses and individuals sending parcels in Europe and wider afield. The
scale of the new combined operation should provide DHL and UPS with some
healthy competition and keep prices down, without lowering standards.
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