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01
feb

Europe Officially Blocks U.P.S. Takeover of TNT Express

The European Commission continued to flex its antitrust muscles on Wednesday, officially blocking U.P.S.’s $6.9 billion bid to buy the Dutch shipping company TNT Express.

The decision was widely telegraphed after U.P.S. withdrew its offer this month, citing regulators’ resistance to the deal.

On Wednesday, the regulators offered more insight into their reasoning, saying the combination of the two shipping companies would have resulted in a major reduction of choice for European customers.

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Facing Resistance, U.P.S. Drops Bid for TNT Express (Jan. 14, 2013)
Businesses based in Europe “would have been directly harmed by the takeover of TNT by U.P.S. because it would have drastically reduced choice between providers and probably led to price increases,” the European Union competition commissioner, Joaquín Almunia, said at a news conference. “We worked hard with U.P.S. on possible remedies until very late in the procedure, but what they offered was simply not enough to address the serious competition problems we identified.”

The deal is the third Mr. Almunia has blocked since he took over the role of the region’s antitrust chief in February 2010.

He previously stopped the merger of Aegean Airlines and Olympic Air, the two largest airlines in Greece, in January 2011. A year later, he blocked the proposed $9 billion merger of Deutsche Börse of Germany and NYSE Euronext, ending their plans to create the largest equity and derivatives exchange.

On Wednesday, Mr. Almunia noted that his group had approved to about 800 deals in the same period.

European authorities can seem tougher than their American counterparts on mergers partly because United States agencies tend to take a somewhat more flexible approach in critical areas, some experts say.

Revised guidelines adopted by American authorities in 2010 meant that “the exact boundaries of the market are not so relevant for the assessment as it was before,” said Mario Mariniello, an economist at Bruegel, a Brussels based research organization. “Cost savings and other benefits to consumers spread across different markets may have more weight in the final assessment” among American authorities, said Mr. Mariniello.

But Dave Anderson, an antitrust partner in the Brussels office of Berwin Leighton Paisner, said any perception that Mr. Almunia was particularly tough on mergers was premature.

“While it may appear that there has been a spike in merger enforcement because this is the commission’s second prohibition in less than a year, Mr. Almunia’s merger record is not out of line with previous commissioners,” he said.

Mr. Anderson said Karel Van Miert, a former competition commissioner, blocked nine mergers during the 1990s, and that Mario Monti, another former commissioner, blocked eight deals in the years after 2000. Mr. Anderson said Neelie Kroes, Mr. Almunia’s immediate predecessor, blocked only two mergers during her term but explained that Mr. Almunia has been facing “a relatively low number of mergers but many in already concentrated markets with complex issues” compared to the docket examined by Ms. Kroes.

In the case of U.P.S., Mr. Almunia said he had tried to work out a solution. He said he met with Scott Davis, the chief executive of U.P.S., twice during the negotiations and told him he would probably clear the deal if a suitable buyer could be found for divestments that included TNT’s subsidiaries in Spain and Portugal.

“U.P.S. was clearly not ready, or not in favor, or not prepared to explore this kind of solution,” Mr. Almunia said at the news conference.

The case focused on so-called integrators in the express mail sector that operate aircraft to move small packages very quickly over long distances and that operate ground networks made up of sorting centers and delivery vehicles.

The commission said in a statement that only four companies — U.P.S., TNT, DHL and FedEx — were significant integrators in Europe. It said FedEx had low market share in a number of European countries, and that national postal operators only provided a limited competitive constraint because they “do not reach comparable efficiency or reliability, given their heavy reliance on road rather than air transport.”

The consolidation envisioned by U.P.S. and TNT would have left customers in 15 countries reliant on only two operators, U.P.S. and DHL, the commission said. Mr. Almunia said the price increases would have hit customers urgently needing spare parts, the results of blood tests and new stocks of medicines.

The collapse of the U.P.S. deal has increased the speculation that others may swoop into to buy TNT, shares of which have dropped in recent weeks. FedEx, which is a much smaller player, has been considered a potential buyer. Mr. Almunia declined to comment on how he would view any potential bid by FedEx for TNT.
NYTimes