Stormy waters

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Following the decision to dispose of a large part of its Logistics division, it has been reported that TNT has received a high degree of interest in the sale. This has led to speculation that the company may be able to dispose of the unit, either as a whole or in multiple parts, ahead of its timetable. Originally management announced that it had set itself the target of completing the disposal by the second half of 2006 but now it is believed that this schedule could be moved forward. No word as yet has been forthcoming from the company itself.

Analysts have put a price tag on the division of anywhere in the order of e2 billion and if this were achieved TNT would make a profit on the business. At the outset many people believed that it would be difficult to find buyers for the unit due to its low overall margins. However it is thought that a combination of trade buyers and private equity companies could now be interested, separately or part of combined bids. As yet Cornelius Geber, the German investor who announced his interest in TNT last year, has not revealed his intentions.

Likely outcome
A break up of the company would still seem perhaps the most likely outcome given the variety of logistics activities in which it is involved and also its wide geographic spread. Its operation in Italy, for example, should be highly attractive given that it would provide any potential buyer with market leadership. However it may need to market to a range of other logistics companies to find buyers for its holdings in automotive joint ventures such as Groupe Cat in France and Anji-TNT in China.

In the ports sector, DP World’s bid for UK based operator P&O has hit problems following growing opposition in the USA. Although the deal has already received regulatory approval from the necessary authorities, a number of prominent politicians, including Hilary Clinton, have promised to initiate legislation that would prevent the sale of several US ports to the Middle East based company. P&O operates five terminals in the US: New York/New Jersey, Philadelphia, Baltimore, Miami and New Orleans.

The concerns centre on security issues. Many in the US believe that strategic transport infrastructure assets should not be controlled by foreign investors, especially those from the Middle East. However President Bush has come out firmly in favour of the right of the Dubai ports company to take over P&O’s ports. He has stated categorically that the United Arab Emirates is an ally and there should be no commercial constraints placed upon them.

The politicians involved in initiating the blocking legislation assert that only five per cent of containers that enter the United States through ports are inspected and that the sale would create an ‘unacceptable risk’ to the security of the ports. However many in the industry are unclear exactly how the deal could compromise security believing instead that the controversy has been generated purely for political purposes. In any case President Bush has promised to overturn any attempt to scupper the sale.

Advanced automation technology
In the express sector, UPS has opened its new expanded European air hub located in Cologne, Germany. The facility, located at the Cologne/Bonn Airport, almost doubles the original hub’s sorting capacity to 110,000 packages per hour. The project has taken 2.5 years of construction and the company claims that it is the most advanced in terms of automation technology as well as the largest facility of its type in Europe.

The construction project, completed at a cost of $135 million, more than doubles the UPS hub at the airport to 813,000 square feet and will make it possible to expand its capacity to 165,000 packages per hour in the future. The growth of the company’s European business is expected to create several hundred new jobs at the Cologne hub, which today employs 1,800.

Finally European transport groups Frans Maas and DSV have confirmed that they are likely to reach agreement on a public offer by DSV for all outstanding shares in Frans Maas. The price agreed has been set at e38.00 including any 2005 dividend. The management of Frans Maas has stated that it will recommend the offer to its shareholders.

The Offer Price of e38.00 per ordinary share represents a premium of 39 per cent to the average share price over the last 90 trading prior to 21 December 2005, the day DSV and Frans Maas issued a press release confirming the discussions between the two companies.

According to the management of DSV the deal represents an opportunity for the company to fulfil its strategy of becoming a pan-European Road freight operator while at the same time broadening its European scope and competences within logistics services. Management believes that the businesses are highly complementary and hopes that the combination will be able to realise synergies through some initial cost savings and optimization of the Frans Maas network.

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