Got any burning questions about FedEx’s acquisition of TNT? We might be able to help.
The two companies held a Q&A session shortly after the takeover announcement was made, and The Hub tuned into the webcast so we could fill you in on all the details.
Highlights of the opening speeches included FedEx Express CEO David Bronczek alluding to the marriage of FedEx’s “purple promise” to TNT’s “orange spirit” as a “match made in heaven”, and the matrimonial metaphors didn’t stop there.
Antony Burgmans, TNT chairman of supervisory board, said it was like TNT had married “the girl next door” and had made a very safe, suitable decision.
“Don’t forget that when you marry the girl next door, you know her very well. So it may appear fast to you, but it was done very thoroughly.
Bronczek and TNT Express CEO Tex Gunning both spoke about the highly complementary nature of the deal, saying that the risk of major redundancies at TNT is low on account of the limited areas of crossover between the companies.
Also present was David Binks, FedEx Express president of European region.
Here’s what happened when questioning was opened up to the floor:
Why do you think FedEx will succeed where UPS failed?
David Bronczek: We never talk about any of our competitors, but for us the timing is best for us now. We see the economy in Europe improving, there's a stronger dollar now. At FedEx we went through our profit improvement plan over the last 6 years which was very successful, so the timing for us worked out perfectly. It was never the right time before. It’s the right time now.
On the regulatory front, we're very confident, we know that there are two strong players in the marketplace. Now there'll be three. And I think what the commission and the regulatory folks would like to see is better competition that's better for the consumer, that has better service optioning. Now there will become 3 main players competing and the customer wins.”
Tex Gunning: “This deal was a much better deal for TNT than the deal we have previously discussed. There's much more certainty here, there’s more opportunities for our people, and because this deal is very complementary, there’s little overlap and therefore less risk of major redundancies.”
The plan for the deal was drawn up in six weeks. Is this not too fast?
Tex Gunning: "I have some experience in deals; I don't think this is fast. We took our time, we hired very good advisers, and they guided us. At the certain time when you think this is the right deal and there's a certain momentum, you better take that momentum, because anything else can happen. It can leak, which brings the company into play, and then you have an uncontrollable process. So I think it was the right time, we took our time, we were well advised and I think it was the right thing to do.
Antony Burgmans: “Don’t forget that when you marry the girl next door, you know her very well, so there isn’t a phase to get acquainted, you know. So it may appear fast to you, but it was done very thoroughly.
What does this mean for the size of FedEx’s European operation?
David Binks: “Currently we are a multi-billion operation in Europe that has been growing significantly. Clearly the majority of TNT's revenue is Europe-based, so we believe it’s going to grow to a significant figure and will make a strong third competitor to take on DHL and UPS.”
TNT recently said it was happy with its standalone strategy. Was this not true, and when did FedEx convince TNT to go ahead with a deal like this instead?
Tex Gunning: I’m even more confident now that the outlook strategy will be implemented. Of course there will be discussion about certain parts of it. But I think the combination is better for all stakeholders."
It’s not that we were confident and then we were not – it’s that this is a good deal. It’s good for our people, customers and shareholders. I don’t see anything to do with confidence here. It was the right thing to do, and it was good for everybody."
David Binks: “It’s not just about the outlook strategy. The whole point is to build on the existing strategy and to work together to build a better combined strategy as we move forward.”
UPS offered about €9.50 per share, FedEx is offering €8. Do you expect rival bids, perhaps UPS coming back?
Antony Burgmans: We’re not going to comment on that. Deal certainty for us was the main issue. This is a much simpler deal than the UPS deal. The overlap with UPS was far bigger, this is far more complementary. The strategic fit is better, we poured over it in all detail and feel very confident. Last time we thought it was doable but it was more complex. This time we are certain as can be in life that this deal will close in Brussels.
It took 6 weeks to come to an agreement, but it’s going to take a year to close the deal? Why does it take so long to close a deal?
Antony Burgmans: I sympathise with your thoughts and your feelings, but governments take their time. These processes are very thorough but on the other hand they take their time as well. That’s how it is. And we’re doing it on a global basis – it’s not only Europe but its China, Brazil, and it just takes time. I share your frustration.