* FedEx has not signaled intent to make a counterbid-source
* FedEx sees strategic value in TNT, but price high-source
* Analysts say FedEx could scoop up divested assets
By Sophie Sassard and Soyoung Kim
LONDON/NEW YORK, Feb 23 Dutch delivery
firm TNT Express is not expecting U.S. rival FedEx
to trump a 4.9 billion euros ($6.5 billion) takeover bid
from United Parcel Services, a source close to TNT said
TNT last week rejected a 9 euros per share cash offer from
UPS, the world's largest package delivery company, but is still
in talks with its U.S. suitor.
TNT's shares jumped to an all-time high of 10.24 euros this
week partly on hopes that FedEx, which has flirted with the idea
of buying TNT for years, might trigger a bidding war.
"The last discussion we had with them (FedEx)
didn't give us the impression that they were ready to make a
move", the source said, adding he had sounded out FedEx's
intentions very recently.
While FedEx sees strategic value in combining with TNT, it
feels the price has become too expensive to do a deal at this
point, another source close to the situation said.
The sources asked not to be identified because they were not
authorized to speak with the media.
FedEx and TNT declined to comment.
Some analysts said FedEx could be better off scooping up
assets that competition regulators might require UPS to sell if
it succeeds in winning over its Dutch target.
Sources close to the talks between UPS and TNT said a
combined firm would need to make significant asset sales in
Europe - the Netherlands, Britain and Germany in particular - to
win regulatory approval.
"You could see some assets that are displaced or some market
share opportunities that come from the deal as well that could
benefit FedEx," said Benjamin Hartford, senior research
associate at Robert W. Baird.
UPS HAS UPPER HAND
FedEx has the financial wherewithal to make a counter bid
for TNT. But its lower valuation than UPS could make a deal more
difficult to sell to its shareholders, a banker familiar with
FedEx's thinking said. Its smaller presence in Europe also means
it may not be able to make as many cost savings.
UPS shares trade at 9.8 times current-year earnings before
interest, tax, depreciation and amortization (EBITDA), while
FedEx trades at just above 6 times, Reuters Starmine data shows.
With a market capitalisation of $28.5 billion, FedEx also
has a weaker balance sheet than the $73 billion UPS.
FedEx has a negligible 3 percent market share in European
delivery, a third of what UPS claims, making it harder for FedEx
to make savings from a deal.
TNT is the market leader in Europe with an 18 percent share,
followed by Deutsche Posts' DHL at 15 percent.
"It's hard for FedEx. UPS has been watching this for a
really long time, and they're pretty well positioned to buy
this," said one sector banker who is not directly involved in
"You could argue that FedEx gets involved only to make it
more expensive for UPS, but I don't think FedEx will make a
proposal if they don't have the intent to really buy that."
The source close to TNT thought the most likely scenario was
that UPS would eventually sweeten its offer to win over TNT.
Deutsche Bank analysts said FedEx could focus instead on
making several smaller acquisitions in select markets or explore
a joint venture with DHL, where FedEx would leverage DHL's
presence in Europe and DHL could leverage FedEx's strength in
the United States.
FedEx has said in the past it plans to grow in Europe
organically and with small "tuck-in" purchases. Its focus over
the next 10 and 20 years has been and will continue to be
developing in Asia, according to analysts.
"We really think the company has been more focused on trying
to find higher growth regions than Europe, which we would expect
to grow at a pace no greater than what the U.S. would grow,"
said Morningstar analyst Keith Schoonmaker.