UNITED PARCEL SERVICE is withdrawing its $US6.9 billion ($6.5 billion) takeover offer for the Dutch shipping company TNT Express, after European authorities indicated they would block the deal over competition concerns.
The failure of the deal is a blow to UPS's expansion efforts. The acquisition of TNT Express, which would have been the largest in the 105-year-history of UPS, would have given it a larger presence in Europe and emerging markets.
The failure also leaves TNT vulnerable. It has reduced operations across Europe amid the sluggish economy and has had setbacks in emerging economies such as Brazil and China.
"The European Union's decision is very disappointing," Stephen Furlong, an analyst at Davy Research in Dublin, said. "It's hard to see the company being bought by anyone else."
TNT Express shares fell 41 per cent to €4.84 ($6.13) on Monday, about half of UPS's offer of €9.50 a share.
The European Commission has shown a willingness to flex its anti-monopoly muscles. Last year, NYSE Euronext and Deutsche Boerse called off their $US9.2 billion merger after regulators demanded the two exchange operators sell significant parts of their businesses.
UPS and TNT, which announced the deal in March, had been in negotiations with European regulators for months. Regulators worried that a merger would effectively create two main players in the European shipping market, UPS and DHL.
To allay competition concerns, UPS had agreed to sell some business units and to grant rivals access to part of its airline network. UPS had tried to convince regulators that selling assets to the French shipping company DPD would help bolster the rival, creating a big competitor. TNT Express also said it would sell its airline operations.
But the changes did not appease regulators, who late last week informed both companies they would not approve the multibillion-dollar takeover. While European officials have until early next month to rule officially, UPS opted to pre-emptively withdraw its offer for TNT.
"We are extremely disappointed with the European Commission's position," the chief executive of UPS, Scott Davis, said. "We proposed significant and tangible remedies designed to address the European Commission's concerns."
UPS must pay a termination fee of €200 million to TNT Express.