UPS to challenge EU regulator’s decision to block merger with TNT Express

United Parcel Services Inc (UPS) yesterday said that it will appeal the European regulator's decision of blocking its proposed $6.85 billion merger with Dutch rival TNT Express NV.

The move comes just two months after UPS withdrew its acquisition offer for TNT after the European Commission (EC) informed it that it will block the proposed merger on the grounds that the transaction would limit competition in the express-delivery segment in the 15 European Union (EU) countries. (See: UPS withdraws $6.85-bn offer for TNT Express as EC refuses approva).

The Atlanta-based company is challenging the EC's ruling since it believes it was "factually and legally erroneous," Peggy Gardner, a UPS spokeswoman, told Reuters in an e-mail.

"We are challenging the decision in order to ensure a more accurate assessment of the EU competitive landscape and that no precedent is established by the EC that would limit international growth opportunities," Gardner wrote.

UPS submitted its appeal to the EC last week, Gardner said.

The EC had in July 2012 started a Phase II investigation into the transaction and had warned that the merged company would corner a large market share in Europe.

TNT holds a 14-per cent market share in Europe, while UPS holds 10 per cent, bringing the combined stake to 24 per cent - more than the 15-per cent held by DHL, a unit of Germany's Deutsche Post AG.

Deutsche Post had opposed the merger saying the deal would create a powerhouse in Europe's express-delivery sector's limited market.

TNT has fully owned operations in 65 countries and delivers documents and parcels to over 200 countries. The company has a fleet of 26,000 trucks, 47 cargo planes and has a worldwide network of more than 2,400 depots and hubs.

In December, UPS offered concessions to the EC by agreeing to divest certain European business units and grant access to some of its airline network to rivals.

In order to ease antitrust concerns, TNT had agreed to sell its airline operations to ASL Aviation Group, comprising of TNT Airways and Pan Air Lineas Areas on condition that the sale will become effective immediately prior to completion of its proposed merger with UPS.

UPS also agreed to sell some of its European assets to French state-owned La Poste SA's DPD parcel distribution unit, and divest a few of TNT's subsidiaries.

The EC rejected the concessions since DPD was a marginal player in the 15 EU countries unlike the four big competitors like UPS, TNT, DHL Express and FedEx.