FedEx to Buy TNT for $4.8 Billion, is it a Good Deal? - Stocks in the News

Zacks Research Staff

Updated Tue, Apr 7, 2015, 2:50 PM

Today, FedEx (FDX) has announced that it will be purchasing one of Europe’s largest delivery companies, TNT Express (TNTEY). The deal comes out to $4.8 billion dollars and FedEx believes the acquisition will strengthen its global operations.

Two years ago, UPS (UPS) tried buying out TNT in a deal worth $7 billion. Under this, UPS would have bought each share for $12.50. FedEx, however, is getting a much better price with a cost of $8.75 per share.

The deal didn’t go through for UPS because of antitrust concerns among European regulators. They cited the fact that UPS would command too large of a space within the European delivery market, and that there wouldn’t be enough competition in the delivery industry.

It’s definitely to FedEx’s benefit that the deal didn’t go through for UPS. After all, FedEx has the strength of the dollar to take advantage of, and many believe that the current low value of the euro against the dollar plays a big role in the purchase.

For the last few years, we’ve been used to seeing each Euro valued around 1.3 dollars. However, the Euro is now only worth 1.09 dollars. Because of this, FDX is able to get a very good price for TNT which it probably wouldn’t have been able to secure even a few months ago.

The deal should go smoothly, as analysts don’t see a regulatory concern becoming an issue like it was for UPS. This is because FedEx will still have much less of a European market share than UPS was proposing to have when it sought to acquire TNT in 2013.

The deal is especially sweet for TNT. Its share price closed at $6.55 just yesterday. Today though, the stock has surged over 25% in trading today. On a deal worth $4.8 billion, FedEx is buying each share 33.6% ($2.25) higher than what TNT was trading for just yesterday.

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FedEx to Buy TNT for $4.8 Billion, is it a Good Deal? - Stocks in the News

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