On the back of a meeting with the European Commission case team, United Parcel Service (UPS) has walked away from a €5.16 billion deal with TNT Express which would have enabled the parties to rival the European market leader, DHL.
The decision by UPS to abandon the deal came after the EC case team informed the parties that the EC was working on a decision to prohibit the proposed deal, despite various remedy packages having been offered to the EC in attempts to address the EC’s competition concerns.
The EC commenced its merger review in March 2012, which went into Phase II review in July, with the EC stating that the “proposed acquisition could in particular reduce competition for the provision of the fastest express delivery services, to the detriment of direct customers and ultimately of European consumers.” The EC subsequently issued a confidential Statement of Objections to the parties on 19 October 2012.
In its press release on 14 January 2013, UPS expressed extreme disappointment at the position taken by the EC particularly in light of the remedies offered. UPS considered the combination “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.”
TNT Express expressed similar disappointment, stating that it “believed the merger was feasible and beneficial for all stakeholders”.
The decision to walk away will have not-insignificant financial implications for UPS which is liable to pay a break fee of €200 million to TNT Express once the EC prohibition is published and the offer is formally withdrawn. The decision is expected to be published in the first week of February.
