TNT investors hold out for higher bid

Mon Feb 20, 2012 5:58pm GMT

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* UPS offer of 9 euro/share seen setting price floor

* FedEx counter-bid also seen as possible

* Biggest shareholder PostNL declines to comment

(Changes slug, adds regulatory issues, shareholder reaction)

By Sara Webb and Sophie Sassard

AMSTERDAM/LONDON, Feb 20 (Reuters) - Investors in Dutch freight and delivery firm TNT Express (TNTE.AS) are pressing for a higher offer from U.S.-based United Parcel Services (UPS.N), driving shares up more than 50 percent on Monday.

TNT said on Friday it had rejected an offer from UPS, the world's largest package delivery company, of 9 euros per share which valued the company at 4.9 billion euros ($6.45 billion), but that both companies were still in talks. [ID:nL5E8DH455]

A source close to the talks said the shareholders wanted to sell their stock and hoped to get between 9.5 and 10 euros per share for a company many of them thought had been run badly but which offers Atlanta-based UPS a bigger presence in Europe.

The Dutch package delivery firm, the smallest of the four world leaders in sending goods and documents swiftly around the globe, was hit by a profit-warning last year.

"TNT's supervisory and executive boards have rejected the bid, which we see as a case of holding out to maximise the sale price with negotiations ongoing," Neil Glynn, analyst at Credit Suisse, said in a research note.

He added that the offer set a floor price for the stock.

TNT shares surged, trading at 9.8 euros at 0900 GMT, or up 54.5 percent from Friday's closing price of 6.343 euros.

Analysts say UPS has long harboured an interest in TNT, which would help it expand in Europe, especially in Britain, France and Germany in addition to the Netherlands. Others said investors may want to tease out an offer from rival FedEx (FDX.N).

EMERGING COUNTRIES

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. Some analysts said it was not big enough to compete with the world's major delivery companies.

Andre Mulder, an analyst at Kepler Capital Markets, said he did not expect major objections from competition authorities, except perhaps in Britain.

"TNT already is the domestic market leader in Europe with an 18 percent share, with Deutsche Post second at 15 percent. Adding the 10 percent for UPS would take it to just below 30 percent," Mulder said.

"Nearing a 33 percent danger level, we think that only in the UK the combination may have too high a market share, so this could be subject to some disposals."

The source close to the talks said that antitrust laws were a potential hurdle but not a deal-breaker. But rival Deutsche Post DHL (DPWGn.DE) said on Monday it expected regulators would have concerns about a combined group. [ID:nWEA2583]

A collective of Dutch trade unions said in a statement on Friday they would evaluate potential bids for TNT to ensure they did not lead to a loss of jobs and would guarantee operations in the Netherlands, including a headquarters in Hoofddorp, on the outskirts of Amsterdam and close to Schiphol airport.

Dutch post firm PostNL (PTNL.AS), which is TNT's biggest shareholder with a 29.9 percent stake, declined to comment.

PostNL shares rose 46 percent on Monday. PostNL has taken impairments of more than 700 million euros on its stake in recent months as shares in TNT Express dropped from a high of 10.20 euros on May 10 to a low of 4.46 euros on Oct. 6.

TNT was spliced off from PostNL last year to try to ringfence the more attractive express delivery operations from a traditional post business that is in decline in the age of electronic mail.

However TNT faces tough price competition on its key routes, a recession in its core European market, and problems in Brazil, where it bought Expresso Mercurio in 2007 and its delivery partner Expresso Aracatuba in 2009, and where it has struggled to integrate those businesses.

Its poor performance in terms of revenue, profit, and share price has led investors, including PostNL, to call for change.

Activist shareholders want a new chief executive, a stronger supervisory board and a turnaround in performance, whether as part of a bigger group such as UPS or FedEx, or as an independent company.

($1 = 0.7597 euros)

(additional reporting by Roberta Cowan and Gilbert Kreijger; editing by Elizabeth Piper)

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