TNT rejects bid from UPS; talks continue

By Roberta Cowan and Lynn Adler

AMSTERDAM/NEW YORK (Reuters) - United Parcel Service Inc is in talks to acquire Dutch delivery company TNT Express NV , which has already rejected a 4.9 billion euro bid that offered a 42 percent premium to its current market value.

UPS, the world's largest package delivery company, has long been rumoured to have an interest in TNT, which would help it expand in Europe, especially Britain, France and Germany in addition to the Netherlands. About two-thirds of TNT's revenue is from European customers, but it also has been steadily growing in China, Brazil and India.

UPS would also be taking out a European rival that has shown a willingness to undercut competitors on price. TNT's revenue has declined as the weak global economy spurred customers to seek cheaper shipping options and some analysts said it is not big enough to compete with the world's major delivery companies.

"We are open to advancing the talks, and we continue to be in discussions," TNT spokesman Ernst Moeksis said on Friday.

UPS offered 9 euros per share for all outstanding TNT stock, the two companies said on Friday after the Dutch company's shares ended the trading day at 6.343 euros. The total price is close to the 5 billion euros analysts recently assigned to TNT.

The bid from Atlanta-based UPS came about nine months after TNT split from delivery company PostNL and as shareholders pressure TNT to shake up its board and boost shareholder value.

Some analysts said the UPS proposal sets the price floor for a company that could be also be attractive to others, including U.S. rival FedEx Corp , which has a smaller presence in Europe.

"This thing just bled and bled, and UPS and FedEx are just sitting back licking their chops," said Kevin Sterling, a transportation analyst at BB&T Capital Markets. "UPS is now the first to show their hand."

FedEx officials declined to comment on Friday. FedEx shares fell 2.12 percent to close at $92.99 on the New York Stock Exchange. UPS shares ended flat at $76.76.

Andre Mulder, an analyst at Kepler Capital Markets, said FedEx's European market share of 2 percent is much lower than key rivals, so he had expected FedEx to move in on TNT.

FedEx "has zero debt and could easily cough up this amount if it could find the banks to lend it the money," Mulder said, noting TNT is the market share leader in Europe with 18 percent. UPS has 10 percent, the analyst said.

Some analysts were not convinced TNT could fetch a significantly higher price than UPS offered.

"I find it difficult to believe that there's going to be a significant bidding war for these assets," said Art Hatfield, managing director in equity research at Morgan Keegan & Co, based in Memphis. "It's a good offer."

PRESSURE BUILDS

UPS officials made it clear the company has discussed more than one offer already with TNT. UPS said the 4.9 billion euro bid was a "revised, increased and comprehensive proposal to acquire the entire issued share capital of TNT." It cautioned there was no certainty any agreement will be reached.

UPS is swooping in as TNT faces mounting pressure from investors to shift gears. Its shares have fallen about 38 percent from a high of 10.20 euros on May 10, 2011, when TNT split from PostNL.

These struggles have prompted calls for action, including pursuing a potential takeover.

Bowing to pressure from activist shareholders, TNT Express agreed this month to appoint several new members to its supervisory board, including two candidates proposed by American investor Jana Partners. Jana and Canada's Alberta Investment Management Corp (AIMCO) have a combined stake in TNT Express of just over 5 percent.

Jana called for an overhaul of the TNT Express supervisory board in December, including replacing the chairman, and urged the company to explore a sale.

PostNL is the largest shareholder in TNT Express - with 29.9 percent - and has taken impairments of more than 700 million euros on its stake in recent months. The company declined to comment on the UPS bid, but it has already indicated it would support a possible takeover.

One TNT shareholder who declined to be identified said: "My reading of it is that UPS is prepared to offer more. That's why they are still in talks with TNT's management."

(Additional reporting by Anthony Deutsch and Gregory Roumeliotis; editing by Jane Merriman, John D. Stoll, John Wallace and Andre Grenon)