(Refiles to fix order of words in second paragraph)
* Says to split units by Jan. 2011
* Q2 EBIT down 69 pct to 55 mln euros
* Dragged down by costs in express unit
* Shares fall 2.5 pct, underperforming market
(Recasts, adds CEO interview, details; updates shares)
By Greg Roumeliotis
AMSTERDAM, Aug 2 European delivery group TNT's
TNT.AS chief executive said on Monday he saw challenges to a
private sale of its postal unit after the company said it would
split its mail and express units by next year.
Peter Bakker told Reuters that while it was open to all
offers, private equity and trade buyers could find an
acquisition of its mail unit difficult. TNT has said it is also
looking at an initial public offering as a way for the Dutch
company to spin off the mail unit.
"How does private equity weigh up with one of the largest
workforces in the Netherlands? I don't know how ready the
Netherlands is to put its postal company in the hands of private
equity," Bakker told Reuters in an interview.
Despite a drive to liberalise the European postal market,
there is no track record of mail acquisitions among trade
buyers, Bakker added.
The company said the separation of its divisions is scheduled
to be implemented Jan. 1, 2011, and a capital markets
transaction will follow to separate the equity, though all
options were open.
That would leave TNT, currently Europe's second largest post
and logistics firm after Deutsche Post (DPWGn.DE), as a global
express delivery company, which is rumoured to be a target for
larger rivals FedEx and UPS.
"If in the meantime somebody else, whether it is private
equity on the mail side, or an American on the express side
think they can create more value, all they need to do is call,"
TNT shares were down 2.5 percent at 22.325 by 1322 GMT, off
earlier lows but the biggest decliner on the STOXX Europe 600
index , as analysts said the company's second-quarter
figures were a letdown.
"Disappointing results, fully concentrated in express
(mostly yields, but also volumes)," Kepler Capital Markets
analyst Andre Mulder wrote in a note. "We will lower our numbers
for this division and the company as a whole."
TNT said it was hit by a 168 million euro provision related
to its Dutch mail restructuring plan. It would have missed
forecasts even without the charge, as underlying operating
profit in its express division came in at 73 million euros, a 16
percent increase but less than the 105 million mean estimate in
a Reuters poll.
TNT said second-quarter operating profit dropped 69 percent
to 55 million euros, far below the 235 million expected by
analysts in the Reuters poll, on revenue up 9.6 pct to 2.77
billion euros, which was nearly in line with the mean estimate
of 2.74 billion in the poll.
"We knew from the consensus estimate for express that people
had very high hopes, fuelled by the results of the American
companies," CEO Bakker said. "But the U.S. competitive landscape
is completely different from Europe, UPS and FedEx dominate
their market and have a lot of pricing power. Also the recovery
in the U.S. is clearly ahead of that in Europe."
U.S. rivals FedEx (FDX.N) and UPS (UPS.N) last month raised
their outlook as more cargo flowed through their networks.
TNT said it had taken measures to improve profitability in
express, such as increasing prices in Europe by an average 3.5
percent, but warned their full effect would not be felt until
TNT also announced the position of chief financial officer,
vacated by Henk van Dalen, who went to VimpelCom, would go to
Finance Director Bernard Bot. Bot has been heading the
separation of express and mail
Analysts have named private equity firm CVC Capital
Partners, which owns part of Belgium's mail service, as a
potential buyer of TNT's mail unit but TNT's CEO was sceptical.
"Private equity could have an interest in mail. But it is
not as if mail is an underperforming asset and private equity
can a do a lot more with it in terms of optimisation. The game
has also changed in the leverage private equity can attract,
limiting the size and scope of deals," CEO Bakker said.
(Additional reporting by Ben Berkowitz; Editing by Jon
Loades-Carter, Louise Heavens and Karen Foster)