TNT Deal Will Enhance FedEx’s Moat Over Time
FedEx's $4.8 billion bid for TNT will combine two firms with quite different strengths while boosting global delivery cost advantages, writes Morningstar analyst Keith Schoonmaker.
We don’t expect the European Commission to forbid the deal, as it did when
FedEx had previously indicated a lack of interest in TNT due to the price, slow EU growth, and questionable cultural fit. Clearly the euro-U.S. dollar exchange rate made the price more attractive, FedEx believes the EU is poised for growth, and FedEx now believes cost and revenue synergies outweigh the integration effort. FedEx does not need to aggressively rationalize redundant facilities, vehicles, and personnel, nor wait for lengthy employment contracts to expire in order to rightsize the acquisition on a massive scale. A greater number of hubs and drop-off locations may win greater share in shipments to and from the EU due to offering later pickup and earlier delivery.
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