UPS offers rivals freighter space to save TNT deal from regulators

ATLANTA's United Parcel Service (UPS), the world's biggest express delivery service, has offered rivals space on company freighters as a concession to win approval from EU regulators for its planned US$6.7 billion buyout of TNT Express.

The proposed concessions also involve the sale of business activities and assets. Eligible buyers of these activities must ensure the long-term viability of their plans and assured continued customer service, reports the UK's Transport Intelligence.

UPS may give rivals access to its delivery trucks, aircraft and warehouses and allow them to ship goods at fixed prices, as well as asset sales, sources familiar with the deal told Bloomberg.

Said a UPS-TNT joint statement: "UPS and TNT Express continue to be fully committed to the merger and are working closely with the EC [European Commission] to gain competition clearance allowing completion of the transaction in early 2013. As part of the approval process, the EC will market-test the remedies on a confidential basis."

The deadline for the investigation by the European Commission, the bloc's regulatory arm, has now been extended to February 5, reports Bloomberg.

The submission seeks to "address the EC's concerns regarding the competitive effects of the intended merger on the international express small package market in Europe," UPS and TNT said in the statement.

The takeover of TNT has faced growing investor scepticism, with the Dutch firm's stock trading at a 20 per cent discount to the EUR9.50 (US$12.33) per share as the struggle continues to secure the merger that would double UPS's size in Europe.

Since announcing the buyout on March 19, UPS has twice pushed back the target date to complete its biggest acquisition in the company's 105-year history as the regulatory review continues.

Said Zurich-based Credit Agricole analyst Beat Keiser: "Clearly they have not been able to change the [European] Commission's market definition, so the next step is asset sales. People will probably take it as a short-term positive, but the risks remain quite high."

EU Competition Commissioner Joaquin Almunia said UPS's bid for TNT requires "substantial remedies" to eliminate antitrust concerns after regulators filed objections to the deal because the acquisition would eliminate one of the few serious rivals to UPS in Europe.

TNT and Deutsche Post's DHL, the market-share leader, are UPS's chief rivals for next-day deliveries in Europe, according to antitrust officials.

UPS's offer may be sent to rivals and customers in the coming days for comments on whether it would resolve antitrust issues. The feedback from that "market test" will help the EU determine whether to accept the proposal or seek further concessions.