TNT small rigids

Since the multi-billion Euro UPS/TNT deal was stalled by the European Commission last month, questions surrounding what the companies plan to do next have been raised. The EC’s decision has made approval for UPS to take over another carrier look unlikely  and analysts say the year-long deal has been a distraction for TNT’s management. So where do they go from here?

Mark O’Bornick at Analytiqa believes the EC’s decision would not have fazed UPS and its European plans. With a $14.17bn (£8.9bn) annual turnover at the end of 2011, it has the financial power to consider taking over smaller carriers and focus on ‘organic growth’ in Europe.

Analysts think Royal Mail’s European logistics arm General Logistics Systems (GLS) is a possible candidate for UPS, with 656 depots and 17,100 vehicles operating across 42 countries. It could also look at expanding its presence in the Asian market.

The termination of the merger opens up the possibility for another carrier such as FedEx to buy TNT, analysts say, but this could again be thwarted by the European political system.

The Wall Street Journal reported that DHL and FedEx lobbied against the merger being approved, so another takeover could possibly raise similar competition concerns as the UPS deal.

TNT could consider expanding into South America and Asia. Mark O’Bornick thinks the firm will consider domestic partnerships in Brazil or China, although he told that its Brazilian plans have been more challenging than expected.

TNT must now look at how it is going to remain one of the leaders in the European parcel market, after a year of consulting with UPS. Before the UPS offering, it had an annual UK turnover of £791m and had set itself a target of reducing EMEA operating costs by €150mn by the end of 2013. It must continue with this challenge to ensure it can still build on its previous success.