China Grants Unconditional Approval of FedEx, TNT Express Merger
In its ongoing efforts to merge, FedEx and TNT Express jointly announced last Friday the unconditional approval of the Ministry of Commerce People’s Republic of China. After winning approvals in the United States (November 2015), EU (January 2016) and Brazil (February 2016), China was the last major regulatory hurdle for FedEx to gain in its acquisition of TNT Express. Many pundits were concerned that China could drag out the process with a lengthy review, but last week's announcement proves those concerns unfounded.
Shipware has long held the position that the pending merger is good for FedEx and TNT Express, and it’s good for consumers as it creates a true third player to complete in the European market. Today, there are two strong players (DHL, UPS) and two weaker players (TNT Express, FedEx). The merged FedEx/TNT Express allows a third competitive player to emerge.
The acquisition makes strategic sense for FedEx to immediately grow its European capabilities, distribution footprint and market share. While FedEx already operates a sizeable air fleet in Europe, TNT Express now gives it an expansive ground network throughout the continent, especially within France and the U.K., where FedEx doesn't have a strong road network. Conversely, it's a good move for TNT Express to expand global capabilities to its customer base, especially in North America.
The announcement is a blow to UPS, which unsuccessfully sought approvals to buy TNT Express a few years ago, and since has lobbied hard against the merger. To date, UPS’s appeals have failed, and in our view is best advised to modify its strategy to focus on ways to position itself in the market against the merged entity.
Rob Martinez is the CEO of Shipware LLC, a professional services firm that transforms businesses through intelligent distribution solutions and strategies. Rob has helped some of the world’s most recognizable brands reduce parcel shipping costs an average of 25 percent through contract negotiations, rate benchmarking, modal optimization, invoice audit and other savings vehicles. A cum laude graduate of UCLA, Rob has 20 years of transportation industry experience, including executive positions at DHL and Stamps.com, in addition to his work as an outside consultant since 2001.