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Deutsche Post DHL, the German mail and express parcel company, expects to pick up customers from rivals UPS and TNT Express once they begin to integrate the two companies as part of their recently announced €5.2bn tie-up.
The deal, agreed last month, will create a company with revenues of about $60bn and has raised concerns about market dominance in certain European countries.
In an interview with the Financial Times, Lawrence Rosen, chief financial officer of DP, said that he was “pretty relaxed” about the combination given his company’s strong global position in high value sectors, such as the market for time-sensitive packages.
UPS has said it expects rapid antitrust approvals, but if European regulators ask it to divest certain assets, Mr Rosen said DP would be likely to examine the pieces, although he added that DP was focused on organic growth.
In March, DP reported strong 2011 operating results thanks to a surge in e-commerce packages and solid growth in emerging markets, and forecast an improved performance in 2012 and beyond.
On Wednesday Mr Rosen said the first quarter of the year was developing as expected, with economic strength in Asia and the US offsetting weakness in Europe. However he added that air freight markets were sluggish due to inventory adjustments in the technology sector.
On the TNTE-UPS deal, he said that “customers like to put their business with more than one provider and so we would expect that on balance we would have a very good position and will be able to pick up more new customers”.
At the same time Mr Rosen said the €400m to €550m synergy targets announced by UPS would necessitate a long period of integration, creating “uncertainty” for customers that could make them amenable to switching provider.
Large-scale deals in the logistics sector have a mixed record. IT problems following DP’s purchase of US based Airborne Express in 2003 led to late deliveries, billing errors and customer defections. DHL eventually pulled back from the US domestic market in 2008.
Last month, David Ross, with Stifel Nicolaus, warned that large-scale network integrations often “start with much more potential benefit than is ever realised”, and flagged up the risk that IT, labour integration issues or management distraction might cause loss of market share to competitors.
UPS says it has developed a cautious strategy to avoid those issues. The group expects the deal to complete by the end of the year, subject to regulatory and other approvals, and then plans to spend four years integrating TNTE to ensure that any changes will not affect customer service.
Kurt Kuehn, UPS chief financial officer, told investors in March: “If you look at the history of failed mergers in transportation and supply chain, it’s usually a lack of appreciation either of the business or it’s a lack of understanding of the complexity.”