Workers load trucks with parcels at the new distribution centre of the German postal and logistics group Deutsche Post DHL in Berlin November 12, 2013. Deutsche Post posted a better-than-expected rise in quarterly operating profit as earnings at its domes
Workers load trucks with parcels at the new distribution centre of the German postal and logistics group Deutsche Post DHL in Berlin November 12, 2013. Deutsche Post posted a better-than-expected rise in quarterly operating profit as earnings at its domestic mail and international courier units helped to offset adverse currency moves. Reuters/Stringer

The United States' anti-trust body, Federal Trade Commission (FTC), has approved the merger plan of US logistics major FedEx Corp (NYSE:FDX) with Dutch logistics company TNT Express (AMS:TNT).

In April, the two companies released details of the deal with Fedex announcing that it would buy TNT for 4.4 billion euros (AU$6.45 billion) in a bid to bolster its business in Europe. FedEx hopes the deal would take it to the second slot just behind Deutsche Post's DHL in Europe.

The European Union has indicated that it is not averse to the deal. Both FedEx and TNT said on Oct. 20 that they were informed by the European Commission that “no statement of objections will be issued” in Europe. The European review is set for Jan. 13, reports Reuters.

Before FedEx stepped in, TMT had an offer from United Parcel Service but that was shot down by the European Commission citing antitrust concerns. However, the FedEx-TNT deal is not expected to face any hassles as the two companies have complimentary operational presence in Europe.

Strategic rationale

Under the deal, FedEx will be buying 100 percent shares of TNT in cash. For TNT the UPS offer was more lucrative at US$7 billion (AU$9.62 billion).

While FedEx is strong in air delivery, TNT’s strength is extensive ground delivery. Antony Burgmans, chairman or TNT Express, already mentioned that more than synergy factor, it is the strategic fit with FedEx that is looking better as compared to UPS.

Frederick Smith, CEO of FedEx, also reasoned that post deal, FedEx will no longer be limited to international shipping services for the European market as it will be gaining a critical edge by boosting the ground delivery network.

The TNT has strong domestic presence in France, Italy and the UK. FedEx is looking to utilise that to expand the foot print of FedEx’s presence in the European market.

In the current quarter, FedEx said it expects holiday shipments to increase 12 percent between Black Friday and Christmas Eve, being driven by growth in e-commerce shopping, reported The Wall Street Journal.

FedEx maintains a positive market outlook, anoting that global GDP growth will be 2.4 percent in 2015 and may grow 2.8 percent in 2016. That growth will be driven by US and other developed markets. The low oil prices will moderate investment but it can improve exports. It has made an industrial production forecast at 2.1 percent growth for 2016 and hopes the manufacturing sector will look up again, according to the investors note.

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