Moving Forward Sans Merger - Research Report on United Parcel Service, Inc.

After anticipating the European Commission to block the merger between UPS and TNT, UPS decided to drop the $6.8 billion bid to acquire TNT.

Jan 24, 2013, 08:00 ET from National Traders Association

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NEW YORK, January 24, 2013 /PRNewswire/ --

On withdrawing its offer, United Parcel Service, Inc. (NYSE: UPS) [Full Research Report][1] paid a termination fee of $265.5 million to Dutch shipping company, TNT Express. The European Commission announced that their objection is primarily due to concerns about future market competition for overnight delivery of parcels across Europe.

If ever the merger happens, this is good news for TNT, but could mean bad news for other messenger companies in Europe. Considered as the world's largest package delivery company and the leading global provider of specialized transportation and logistics services, UPS could have given TNT the chance to dominate the European market.

But the European Commission feared that the merger could negatively influence the market dynamics as UPS would have monopolized the delivery business in Europe and might bring unfair competition, affecting pricing policies and services, thus impacting end-users.

Although UPS can sustain and move forward without the acquisition, it is still a big disappointment for the company, as its chances of boosting its footprint in Europe and consolidating its position as a global leader did not materialize. It could also mean losing significant synergies for UPS.

TNT could have been UPS' biggest acquisition. Despite this failed agreement, the company is still aiming to acquire smaller companies. "While we viewed the acquisition as a compelling growth platform, our financial strength allows UPS to capture future opportunities," said Scott Davis, UPS Chairman and CEO. Analysts' equity summary score for UPS is bullish at 7.9 with a neutral recommendation, given this renewed focus on core operations, allowing for potential margin expansion.

The company has also been upgraded from a "hold" rating to a "buy" rating, as analysts see a more aggressive capital deployment and fewer headwinds constraining share performance following the merger termination between UPS and TNT.

On the other hand, TNT shares went down 41% by last Monday's market close after the failed acquisition. Looking beyond this, analysts are still confident with TNT, believing that with the company's exposure to the Asia Pacific and Brazil, it is still an attractive takeover target.

Considering the market situation of both companies, there is definitely life after UPS for TNT, and vice versa. In the first place, many investors were cautious and not confident with the merger, resulting for both shares to go down. The failed acquisition was actually a relief. Both companies can now focus on the growth of their core operations. The lesson here is some things are better left alone.

Reference Links:

[1] The Full Research Report on United Parcel Service, Inc. - including full detailed breakdown, analyst ratings and price targets - is available to download free of charge at: [ ]

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