Robin Van Lonkhuijsen/ReutersA TNT Express van in the Netherlands. The deal’s failure will hurt U.P.S.’s expansion plans in Europe and emerging markets.8:41 p.m. | Updated
United Parcel Service is withdrawing its $6.9 billion takeover offer for the Dutch shipping company TNT Express, after European authorities indicated they would block the deal over antitrust concerns
The failure of the deal is a blow to U.P.S.’s expansion efforts. The acquisition of TNT Express, which would have been the largest in the 105-year-history of U.P.S., would have given it a larger presence in Europe and the emerging markets.
The failure also leaves TNT vulnerable. It has reduced operations across Europe amid the sluggish economy and has had setbacks in emerging economies like Brazil and China.
“The European Union’s decision is very disappointing,” said Stephen Furlong, an analyst at Davy Research in Dublin. “It’s hard to see the company being bought by anyone else.”
Shares in TNT Express fell 41 percent, to 4.84 euros, or $6.46, on Monday. U.P.S. had offered 9.50 euros a share for TNT.
U.P.S. rose 1.7 percent on Monday, to $79.24. Some investors had worried that such a merger would distract U.P.S., especially as it sought approval from the European Commission.
The commission has been willing to flex its antitrust muscle. Last year, NYSE Euronext and Deutsche Börse called off their $9.2 billion merger, after regulators demanded that the two exchange operators sell significant parts of their businesses.
Other deals have passed muster only with major changes. In approving Universal Music Group’s takeover of EMI Music last year, European regulators required the sale of a third of EMI’s assets.
U.P.S. and TNT, which announced the deal last March, had been in negotiations with European regulators for months. Regulators worried that a merger would effectively create two main players in the European shipping market, U.P.S. and DHL.
To allay antitrust concerns, U.P.S. had agreed to sell some business units and to grant rivals access to part of its airline network. U.P.S. had tried to convince regulators that selling assets to the French shipping company DPD would help bolster the rival, creating a sizable competitor. TNT Express also said it would sell its airline operations.
Since November, U.P.S. revised its bid three times.
But the changes did not appease regulators. Late last week, regulators informed both companies that they would not approve the multibillion-dollar takeover. While European officials have until early February to rule officially, U.P.S. opted to pre-emptively withdraw its offer for TNT.
“We are extremely disappointed with the European Commission’s position,” D. Scott Davis, the chief executive of U.P.S., said in a statement. “We proposed significant and tangible remedies designed to address the European Commission’s concerns with the transaction.” U.P.S. must pay a termination fee of 200 million euros, or $267 million, to TNT Express.
With U.P.S. backing away, TNT’s future looks uncertain. After a tough 2011, it has improved modestly, gaining in revenue and profit through the first three quarters of last year. But TNT, which has large operations across Europe, would need a large injection of investment to expand globally, analysts said.
FedEx, which has a much smaller operation in the region than U.P.S., could be a potential suitor. But a deal with the European shipping giant DHL probably would also raise antitrust concerns.
U.P.S. must now go to Plan B in Europe. In a research note on Monday, analysts at Credit Suisse predicted that the company would continue to invest in the region and increase the size of a planned share buyback plan. U.P.S. said it would look for opportunities to grow organically and through acquisitions. For instance, it could seek smaller acquisitions in peripheral European countries that would not raise antitrust concerns.
Morgan Stanley, UBS, Bank of America Merrill Lynch and the law firm Freshfields Bruckhaus Deringer advised U.P.S. Goldman Sachs, Lazard and the law firm Allen & Overy advised TNT Express and its supervisory board.
Michael J. de la Merced contributed reporting from New York.