http://www.forbes.com/markets/2007/0...markets10.html

Deutsche Post Rated Second Class
Lionel Laurent, 08.28.07, 1:00 PM ET

LONDON - German mail operator Deutsche Post is not going to have a very happy new year in 2008 when the German postal sector is liberalized, say the analysts that downgraded the stock on Tuesday.

Although there have been efforts to delay the liberalization of Europe's 88 billion euro ($119.9 billion) mail market, which was pushed back to 2011 from 2009 in July, Germany is still on target to open up its national postal sector to competition at the start of next year.

"A delay to German mail liberalization (scheduled for 2008) now seems unlikely," said Matthew Lloyd, analyst with Goldman Sachs. He told clients that Deutsche Post faced volume loss and margin erosion from increased competition, and downgraded the stock to "Sell" from "Buy."

Shares in Deutsche Post fell 67 eurocents (91 cents), or 3.1%, to 20.82 euros ($28.37) in Frankfurt. The stock finished bottom of the DAX index, which slid 28.52 points, or 0.4%, to 7,457.47.

Although Deutsche Post currently has over 90% market share in Germany, the threat to its business from outside competition has seen the company forecast a drop in earnings between 10%-20% in 2009.

So what options are there for the mail operator? According to Goldman Sachs' Lloyd, "a cost-cutting program is unlikely to compensate for revenue declines." On the other hand, he admitted that "a credible and larger than expected cost saving program" could do the trick.

Although reducing the size of the business is the most likely step the company will choose to take, it could opt for a break-up to release value or hope that private equity is still interested. Last week, shares in Deutsche Post climbed on speculation that Apax Partners would team up with U.S. rival United Parcel Service to buy a stake.
But there is no doubt that in the short term, Deutsche Post is about to get a lot of analyst hate mail.

http://www.ft.com/cms/s/0/0180bbe0-5...0779fd2ac.html

German mail and logistics group Deutsche Post rose 2.3 per cent to €21.31 on talk that US parcel delivery service UPS – with private equity backing from Apax Partners – was interested in buying the 30.6 per cent stake held by state-owned bank KfW Group for about €28 a share.

Strategists said a deal would throw open other avenues of opportunity, particularly in Deutsche Postbank, which is majority owned by Deutsche Post.

In June, Commerzbank said it would launch a bid for Deutsche Postbank if it were up for sale. However, Deutsche Post has repeatedly said it was not interested in selling its stake. Deutsche Postbank shares rose 0.9 per cent to €53.94.