Brussels launches probe into FedEx’s proposed TNT takeover

The European Commission has opened an in-depth investigation into FedEx’s proposed $4.8bn takeover of TNT Express over concerns the deal could reduce competition and push up prices.
The Commission said it had concerns that on a number of European markets for international express and regular small package deliveries, the merged entity would face insufficient competitive constraints from the only two remaining players, UPS and DHL.
This could lead to higher prices for business customers and consumers, it said.
Both TNT and FedEx described the probe as a phase 2 review and said it was a customeray part of the Commission’s investigation process.
Commissioner Margrethe Vestager, in charge of competition policy said: "Many businesses, and in particular e-commerce, rely heavily on affordable and reliable small package delivery services, and many consumers depend on these services to ensure rapid and safe delivery of goods they have bought.
“The Commission must therefore make sure that FedEx’s takeover of TNT would not impede effective competition and would not lead to higher prices for consumers.”
A preliminary investigation conducted by the Commission indicated that DHL and UPS would be the only significant competitive constraint on the merged entity for most international express services, with a destination within or outside the European Economic Area (EEA).
As the proposed transaction would reduce the number of integrators competing in the EEA from four to three, the competitive constraint on the merged entity would be significantly reduced, leading to a concentrated market in several member states for international express delivery services to a destination within or outside the EEA, it said.
The Commission’s initial investigation also showed that the merged entity would have very high market shares for services to some destinations leading to potential competition concerns.
The Commission now has 90 working days, until December 8, to investigate the proposed acquisition and to determine whether initial concerns are founded.
FedEx said the transaction is also being reviewed by other antitrust agencies, including the Ministry of Commerce (MOFCOM) in China and Conselho Administrativo de Defesa Econômica (CADE) in Brazil.
FedEx Express Europe president David Binks said: “We will continue to work together with TNT Express to meet the European Commission’s need for additional due diligence and are confident that the combination of both companies will increase competition and create benefits for customers.
“We continue to make progress on all of the necessary regulatory steps around the world that would allow us to complete this transaction in the first half of 2016 and unite two great teams that share a passion for customer service.”
TNT said it looked forward to the success of the intended acquisition.
“The company will continue to cooperate with FedEx and the European Commission with a view to a positive outcome,” it added. “During the transaction approval process, TNT remains focused on executing its Outlook transformation and turnaround strategy.”
FedEx had sought to assuage competition concerns by promising to sell the TNT air fleet of 54 freighter aircraft to a third party.
On announcing its half-year results, TNT said it expected the deal to be completed in the first half of next year.
The takeover of TNT is based on an all-cash offer by FedEx for all issued and outstanding ordinary shares, including shares represented by American Depositary Receipts of TNT Express for a cash offer price of €8.00 per share.
FedEx started the formal process to obtain merger control approval from the Commission by submitting the required filing to obtain regulatory clearance on June 26.

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