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What is Europe worth to UPS and FedEx?

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What's at stake in the potential bidding war between UPS and FedEx for TNT Express that may have been triggered by UPS's unsolicited $6.4 billion bid last week? For an idea of what UPS/FedEx would be acquiring, here's the Amsterdam-based company's newly-released 2011 annual report.

TNT is not an inconsequential player globally, with a presence in China and Brazil in particular, and UPS/FedEx will mull the international assets when contemplating bids. But much of this is about the European express delivery market. UPS by acquiring TNT, Europe's number two player, could increase its presence in the market to nearly on par with DHL, the continent's number one player, while relegating FedEx to distant, second-tier status.

FedEx, with the buy, would instantly become a big player in Europe (something it is not now), but not big enough to vanquish UPS or really approach DHL. And Europe is a dreary market currently with limited growth potential, certainly near-term. Is it worth it for FedEx to take an expensive stand by outbidding its rival UPS for TNT, which, after all, is a loss-making company? TNT incurred a €270 million ($357.2 million) 2011 net loss.

But the conditions exist for tit-for-tat bidding. UPS and FedEx are well-off companies with cash to spend on acquisitions they deem worthwhile. How much is Europe worth to them?

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