By Sara Webb and Anthony Deutsch
AMSTERDAM, Jan 14 (Reuters) - United Parcel Service Inc said it would drop its 5.2 billion euro ($7 billion) bid for Dutch delivery firm TNT Express on the expectation of an EU veto, a sharp blow that halved the value of TNT's shares within minutes.
U.S.-based UPS, the world's No. 1 package delivery company, had sought to buy the Dutch firm to gain access to its European network and business in fast-growing Asia and Latin America.
The collapse of the deal is particularly damaging for TNT Express, which has struggled to turn around in a weak European market and will have trouble regaining market share, believed to have been eroded during the talks with UPS. The plunge in its share price wiped more than 2 billion euros off its value.
UPS would also have to adjust to the loss of opportunity, said Philip Scholte at Rabobank: "This is going to make it hard for UPS to increase its position in Europe on its own."
UPS and TNT Express said the European Commission, the EU's executive body, had told the two firms it was working on a decision to prohibit the proposed acquisition, leaving them no choice but to abandon it.
"UPS will pay TNT a termination fee in the amount of 200 million euros and will withdraw the offer," once the formal decision is taken, UPS said on Monday.
The European Commission declined to comment. EC competition policy spokesman Antoine Colombani said the decision would be taken in "due time" with a deadline of Feb. 5.
TNT Express has been forced to cut capacity in Europe in response to falling demand, was hit by restructuring problems in Brazil, and is considered a minor player in China. Its chief executive quit soon after UPS made its offer.
TNT Express shares fell to 4.051 euro, compared with the UPS offer price of 9.50 euro per share.
"This is a big disappointment of course. The market had discounted the shares slightly below the offer price, but everyone had thought they would be able to work something out in the end," said Rabobank's Scholte.
After focusing on the deal for nearly a year, TNT Express will have to find a new chief executive and set out a new business strategy. The deal had initially been expected to close in the third quarter of 2012.
"Now TNT will have to continue alone. TNT's management will have to roll up their sleeves, come up with a plan and get down to work," Scholte said. TNT Express said it would give an update on its strategy in due course.
A new merger seems unlikely, at least in the short term. Its closest European rival, Deutsche Post's DHL is bigger in Europe and would be unlikely to get European approval for an acquisition.
"America's FedEX is the only other option and they are not going to be in any hurry because there is simply no rival bid," said analyst Maarten Bakker of ABN Amro.
The U.S. delivery company had offered various concessions in a bid to win EU regulatory approval for its bid, including a proposal to sell warehouses and customer bases in about 15 countries, mainly in eastern Europe.
"We proposed significant and tangible remedies designed to address the EC's concerns with the transaction," Scott Davis, UPS chairman and chief executive said in a statement, expressing disappointment at the decision after months of talks.
"The combined company would have been transformative for the logistics industry, bringing meaningful benefits to consumers and customers around the world, while supporting growth in Europe in particular," Davis added.
Shares in PostNL, TNT's biggest shareholder which had been counting on using proceeds from the deal to pay investors a dividend, also plunged a third on the news.
Our 2024 Coverage Needs You
It's Another Trump-Biden Showdown — And We Need Your Help
The Future Of Democracy Is At Stake
Our 2024 Coverage Needs You
Your Loyalty Means The World To Us
As Americans head to the polls in 2024, the very future of our country is at stake. At HuffPost, we believe that a free press is critical to creating well-informed voters. That's why our journalism is free for everyone, even though other newsrooms retreat behind expensive paywalls.
Our journalists will continue to cover the twists and turns during this historic presidential election. With your help, we'll bring you hard-hitting investigations, well-researched analysis and timely takes you can't find elsewhere. Reporting in this current political climate is a responsibility we do not take lightly, and we thank you for your support.
Contribute as little as $2 to keep our news free for all.
Can't afford to donate? Support HuffPost by creating a free account and log in while you read.
The 2024 election is heating up, and women's rights, health care, voting rights, and the very future of democracy are all at stake. Donald Trump will face Joe Biden in the most consequential vote of our time. And HuffPost will be there, covering every twist and turn. America's future hangs in the balance. Would you consider contributing to support our journalism and keep it free for all during this critical season?
HuffPost believes news should be accessible to everyone, regardless of their ability to pay for it. We rely on readers like you to help fund our work. Any contribution you can make — even as little as $2 — goes directly toward supporting the impactful journalism that we will continue to produce this year. Thank you for being part of our story.
Can't afford to donate? Support HuffPost by creating a free account and log in while you read.
It's official: Donald Trump will face Joe Biden this fall in the presidential election. As we face the most consequential presidential election of our time, HuffPost is committed to bringing you up-to-date, accurate news about the 2024 race. While other outlets have retreated behind paywalls, you can trust our news will stay free.
But we can't do it without your help. Reader funding is one of the key ways we support our newsroom. Would you consider making a donation to help fund our news during this critical time? Your contributions are vital to supporting a free press.
Contribute as little as $2 to keep our journalism free and accessible to all.
Can't afford to donate? Support HuffPost by creating a free account and log in while you read.
As Americans head to the polls in 2024, the very future of our country is at stake. At HuffPost, we believe that a free press is critical to creating well-informed voters. That's why our journalism is free for everyone, even though other newsrooms retreat behind expensive paywalls.
Our journalists will continue to cover the twists and turns during this historic presidential election. With your help, we'll bring you hard-hitting investigations, well-researched analysis and timely takes you can't find elsewhere. Reporting in this current political climate is a responsibility we do not take lightly, and we thank you for your support.
Contribute as little as $2 to keep our news free for all.
Can't afford to donate? Support HuffPost by creating a free account and log in while you read.
Dear HuffPost Reader
Thank you for your past contribution to HuffPost. We are sincerely grateful for readers like you who help us ensure that we can keep our journalism free for everyone.
The stakes are high this year, and our 2024 coverage could use continued support. Would you consider becoming a regular HuffPost contributor?
Dear HuffPost Reader
Thank you for your past contribution to HuffPost. We are sincerely grateful for readers like you who help us ensure that we can keep our journalism free for everyone.
The stakes are high this year, and our 2024 coverage could use continued support. If circumstances have changed since you last contributed, we hope you'll consider contributing to HuffPost once more.
Support HuffPostAlready contributed? Log in to hide these messages.