July 24, 2008, 10:00 am
Breaking News: FedEx-TNT Talks Returned to Sender

Posted by Dana Cimilluca
Investors betting FedEx will soon mail a takeover offer to Dutch letter- and package-delivery concern TNT may be disappointed.
Rumors of a possible transatlantic purchase of TNT, which now has a market cap of about nine billion euros (or roughly $14 billion), have swirled ever since the Financial Times reported July 11 that FedEx was in “preliminary talks” to acquire TNT. That has helped boost shares of TNT nearly 40% since then.
That rise could prove short-lived. People familiar with the matter tell Deal Journal that even though there were low-level talks about such a deal recently–as there have been many times in the past decade–the discussions didn’t lead anywhere.
Buying TNT, with its strong position in the European market, would turbocharge FedEx’s international expansion at a time of flagging U.S. demand and possibly enable it to trim costs at a time of soaring fuel prices.
But those same headwinds the Memphis, Tenn., company faces would limit its ability to pay the price necessary to get a deal done and likely contributed to the talks being aborted. FedEx reported its first quarterly loss in 11 years in June. Even after a recent rebound, its shares have tumbled 27% in the past year–hardly strengthening its M&A hand.
Another hurdle to a deal is UPS, FedEx’s larger rival in the U.S. UPS has also considered buying TNT is the past, with a private-equity partner, according to another person familiar with the matter. It could be expected to compete with FedEx should FedEx ever get serious about a deal with TNT.
Perhaps the biggest deterrent, however, is TNT’s stock. The company might have looked attractive to FedEx with its stock down more than 40% in the past year. But that was before talk of a possible deal surfaced. The ensuing surge alone would likely be enough to send FedEx packing.
–With Douglas A. Blackmon and Alex Roth