UPS has pulled out of its €5.16bn offer for TNT Express - in a deal that would have created a business with a combined annual turnover of £1.3bn in the UK - blaming  European Commission (EC) concerns with the acquisition.

The proposed merger is expected to be prohibited by the EC, the parcel giants warned in joint statements this morning (14 January).

TNT said UPS sees "no realistic prospect" that it will receive EC clearance and will formally terminate the merger when it receives the decision. UPS has agreed to pay TNT a €200 million (£165m) termination fee when the EC issues its decision.

UPS chief executive Scott Davis said the US firm was "extremely disappointed" with the EC’s position.

"We proposed significant and tangible remedies designed to address the EC’s concerns with the transaction," he said.

"The combined company would have been transformative for the logistics industry, bringing meaningful benefits to consumers and customers around the world, while supporting growth in Europe in particular," he added.

TNT said the acquisition had been a distraction for its management and its strategy now is to: reassure customers; ensure the commitment of its employees and make steps to improve profitability.