Fedex wants to take TNT over: will it happen or not?

In 2010 we predicted already that the market of courier delivery services would consolidate.Our prediction quickly turned true as UPS tried to take over TNT. This takeover was later rejected by the European commission, arguing that this would have restricted competition (read the press release here for more information). In some member states, the Commission argued, the competition would have been reduced to two players, leaving DHL and UPS head-to-head.

What is happening today, with Fedex proposal to take over TNT, is the logical consequence of the aborted merger of UPS and TNT.

The rationales behind the Fedex / TNT merger

In its press release, Fedex advances the exact same argument that made us predict, 5 years ago, that a merger had to be expected: the reinforcement of Fedex’ presence on the European ground. In the press release, Fedex mentions 5 key rationales for making this deal. However, only one seems to make really sense to us: the enhancement of the global network. TNT Express has a strong European road platform and recently renovated its Liege hub. Fedex has an amazing network worldwide, expect really in Europe. However Fedex has one of the most amazing sorting plant in Cologne (located on the airport grounds, next to UPS hub).

What will happen next?

We are positive that this merger may indeed by approved by the European Commission. The main argument of the Commission to reject the UPS / TNT deal doesn’t hold anymore. Actually this deal converges with the Commission’s objectives, i.e. increase competition. The number of key players will not be reduced in member states. Fedex will not hold a dominant position but will reinforce its competitiveness which may have benefits for customers.

However there are at least two drawbacks: increased pressure on competitors may have social consequences for employees; the future of the TNT Liege hub is once again at stake. Millions of euros had just been injected to renovate and enhance the site. However, with the ultra modern hub opened by Fedex at Cologne airport in 2011, once may wonder why a second Hub should be maintained only 130km away.

By Pierre-Nicolas Schwab Dr. Pierre-Nicolas Schwab is the founder of IntoTheMinds. He specializes in e-commerce, retail and logistics. He is also a research fellow in the marketing department of the Free University of Brussels and acts as a coach for several startups and public organizations. He holds a PhD in Marketing, a MBA in Finance, and a MSc in Chemistry. He can be contacted by email, Linkedin or by phone (+32 486 42 79 42)