FedEx plans to acquire TNT would shake up the industry

                            

Independent research company Datamonitor says FedEx is reported to be interested in acquiring TNT, which seems to suggest that it does not want to rely on organic growth to strengthen its position in the global express market. Although combining two of the world’s leading players would put strong pressure on the other two integrators, UPS and DHL, overall, the competitiveness of the industry looks set to remain intact.

 

FedEx, which reported negative results in the last quarter of its financial year and subsequently issued a pessimistic outlook, is heavily reliant on the slowing US market. As a result, it now appears to be looking for radical ways to improve its position in the global express sector. Despite the weakened US dollar, the effects of a tougher economic environment and rising fuel costs appear to have sparked FedEx’s renewed interest in the acquisition of Dutch mail and express rival TNT.

 

FedEx has already been trying to reduce its dependence on its home market and the use of air networks by building a stronger presence in the European market, as well as investing in its Asian network. The acquisition of ANC in the UK helped to secure a stronger position in one of Europe’s key markets, and TNT’s dominant position in the intra-European express market makes it an ideal target that would allow FedEx to develop its position in Europe further.

 

Preliminary results from Datamonitor’s upcoming European Express Market Map suggest that, despite showing decreasing growth rates, the European express market is still in a good state, with the B2C and Eastern European markets acting as its main growth drivers. TNT is particularly well positioned to capture any growth in the B2B markets as it has a strong road and air network that is operational in all the key markets. The company also boasts a strong position in emerging markets in the rest of the world, notably the Brazilian, Russian, Indian and Chinese (BRIC) markets and the Middle East.

 

FedEx and TNT have reciprocal geographic strengths and, as TNT has lost its monopoly in its home mail market, a combination of the two companies appears to make strategic sense. The merger would also put significant pressure on European market leader DHL, which is trying to recover its market position in the US, where it continues to lose money in a co-operation agreement with UPS (which has also been reported to have an interest in acquiring TNT).

 

Should the tie-up be completed, the effects would be far-reaching, says Datamonitor Logistics and Express senior analyst Erik Van Baaren. “Significant pressure would be placed upon DHL and UPS, given that they would have to compete with a global player capable of exploiting greater economies of scale and serving the needs of globally operating companies more efficiently as further internationalization of the industry takes shape.”

Both FedEx and TNT have declined to comment.

MREC HERE

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