TNT takeover talk is a bonanza for investors

Chicago: In the world of package companies, there is one story you can rely on to come up with mind-numbing regularity: speculation that either United Parcel Service or FedEx are in talks to buy TNT.

The latest speculation that UPS is in talks to buy TNT for 10 billion euros ($15.2 billion) sent the Dutch mail company's stock up more than five per cent.

A mid-July rumour that FedEx was doing the same sent TNT stock up nearly 30 per cent in a single day. Ten days later, TNT's stock fell 18 per cent on a report that talks had ended.

While this talk almost invariably comes to naught - and both companies have consistently refused to comment on the recurrent rumours - some day TNT would make a good fit for UPS and an even better one for FedEx. TNT's stock rises on rum-ours of an imminent bid because a deal is seen as a good long-term strategy for either company.

Sensible rumour

"The rumours come up every couple of months, and every time nothing happens," said Jason Seidl, an analyst at investment bank Dahlman Rose. "The problem is that a deal makes sense, FedEx needs TNT, and UPS could use it, so that's why TNT's shares react."

"Eventually, I am convinced there will be a deal, but in the meantime it's like the little boy who cried wolf," he said.

Most analysts greeted the latest episode in what Seidl termed the "TNT saga" with more than a dash of scepticism. They rolled out reasons why the Dutch company would be a good buy but also stressed that any announcement of a deal by UPS or FedEx would result in a bidding war.

"Recently, there has been increased press speculation about first FedEx and now UPS purchasing all of TNT or its Express division," Edward Wolfe of Wolfe Research wrote in a note for clients. "We ... believe at this point there remains little evidence of such a deal occurring."

Even if a deal is not in the works, stock moves on the back of rumours are suspicious, some analysts said.

"It is a little suspect that we get these persistent rumours from unknown sources that have such an impact" on TNT's stock, said Dahlman Rose's Seidl.

To understand the attraction of TNT to UPS or FedEx, one should look at its market share in Europe.

Some analysts put the Dutch mail company's share at around nine per cent. Deutsche Post express delivery unit DHL has 15 per cent market share, while the world's largest delivery company UPS has six per cent and FedEx has two per cent.