Northern, WI 1/15/2013 (usmarketbuzz) – The block on the deal between United Parcel Service, Inc.(NYSE:UPS) and TNT Express NV(AMS:TNTE) will be quite a blow to investment advisers. The European Commission told United Parcel Service, Inc.(NYSE:UPS) on January 11th that it would pull the plug on this deal. Investment advisers like Morgan Stanley, UBS AG (USA) (NYSE:UBS) and the Bank of America Corp (NYSE:BAC) who expected to roll in close to $55 million will now have to settle for only 10% of the expected amount. This was one of the largest acquisitions for TNT Express NV(AMS:TNTE) and was worth $6.18 billion. Peter Hahn, a lecturer at Cass Business School in London and a former managing director at Citigroup Inc. agrees that this is bad news for all the banks and also hopes for better scrutiny of consolidation regulations.
According to analyst Helane Becker the acquisition was worth a lot and was a pretty complex deal to be approved very easily. The EC mentioned its concerns with overnight package delivery services in Europe. The United Parcel Service, Inc.(NYSE:UPS) also seem to have given up as any further concession seems to be futile. They have already offered remedies in various countries and have also provided access to their flight networks. In her research note, Helane Becker also mentioned that the timeline for this transaction was too unrealistic and was the main cause for its failure.
This is not the first time the EU has vetoed a big deal. A similar incident occurred in February last year when it put an end to the deal between Deutsche Boerse AG
(ETR:DB1) and NYSE Euronext ‘s(NYSE:NYX) $9.5 billion deal. The two giants hoped to strike a deal and create the world biggest exchange. The EU concluded that this merge would pack a blow to competition and put an end to the deal. The between TNT Express NV(AMS:TNTE) and United Parcel Service, Inc.(NYSE:UPS) which set out to become the 14th largest intercontinental deal has to now settle with being in the biggest deals gone wrong.
Not only did the banks suffer from this block, TNT Express NV(AMS:TNTE) also hit its lowest share value following the EC’s notice. Their shares fell by a good 51% causing losses worth 2.3 billion euros. The shares of the packaging giant closed at 8.25 euro on Friday. The shares closed at 4.84 euros yesterday. In addition to that UPS will have to pay close to 200 million euros as termination charges once the deal is officially stopped by the EC.
The EC is trying to find a packaging company that is large enough to fill the TNT void. UPS planned on selling its assets to DPD parcel- distributors to create a practical competitor in the market. The hedge funds have also received a shocking blow and have reached the highest level yet in the beginning of a year in the last 7 years. According to Joel Ray, a Transport intelligence analyst, TNT should become a pure road operator as the air business is in decline and is infact, an expensive affair.
The shares of United Parcel Service, Inc.(NYSE:UPS) were up 1.69% by and closed at $79.24
The shares of TNT Express NV(AMS:TNTE) were up by 2.95%and closed at $4.94
The shares of UBS AG (USA) (NYSE:UBS) were up 0.29% by and closed at $17.34
The shares of Bank of America Corp(NYSE:BAC) were down by 1.38% and closed at $11.47
The shares of Boerse AG(ETR:DB1) were down by 0.49% and closed at €46.56
The shares of NYSE Euronext(NYSE:NYX) were up by 0.03% and closed at $32.74
