Mark Solomon joined DC VELOCITY as senior editor in August 2008, and was promoted to his current position on January 1, 2015. He has spent more than 30 years in the transportation, logistics and supply chain management fields as a journalist and public relations professional. From 1989 to 1994, he worked in Washington as a reporter for the Journal of Commerce, covering the aviation and trucking industries, the Department of Transportation, Congress and the U.S. Supreme Court. Prior to that, he worked for Traffic World for seven years in a similar role. From 1994 to 2008, Mr. Solomon ran Media-Based Solutions, a public relations firm based in Atlanta. He graduated in 1978 with a B.A. in journalism from The American University in Washington, D.C.
UPS Inc.'s proposed $6.8 billion buy-out of Dutch express delivery firm TNT Express may be experiencing more than just a passing squall.
On Friday, Atlanta-based UPS said it received a "statement of objections" from the European Commission (EC), the executive body of the European Union, to the proposed purchase of TNT Express, based in Hoofddorf.
In a statement released Friday, UPS said the document—the contents of which have been kept confidential—"addresses the competitive effects of the intended merger on Europe's international express market."
UPS called the document a routine part of the 27-member EC's regulatory review process and said that both companies are expected to respond to regulators' concerns within the next couple of weeks.
Peggy Gardner, a UPS spokeswoman, said the EC statement "helps to further focus the areas of discussion moving forward" and that it doesn't "prejudge the outcome."
Still the statement of objections has forced UPS to extend the deadline to complete the transaction for the second time since both companies formally agreed to the deal on March 19. The initial deadline was Aug. 31, which was then pushed back to Nov. 9 due to competitive concerns raised in Europe. On Friday, UPS said the deadline has now been extended to early 2013. Initially, UPS had not anticipated any regulatory static over the deal.
UPS said it remains committed to the acquisition. The issue is likely to be raised tomorrow during UPS' scheduled analyst call to discuss its third-quarter results. Given the hush-hush climate surrounding the deal, however, it is likely executives will provide no new information.
The main sticking point could be a disagreement over the size of the European parcel market. That wouldn't be surprising, since analysts have proffered conflicting market share estimates since the transaction was announced in February. One estimate that appears to stick was made by New York-based investment firm Wolfe Trahan & Co., which pegged TNT Express as the market leader with 18 percent, followed by DHL Express with 16 percent, UPS with 14 percent, and FedEx Corp. with 4 percent.
The EC's review process comes as the Euro-zone grapples with a major financial crisis mostly afflicting its southern region. Given the current turbulence, David G. Ross, transport analyst at Stifel, Nicolaus & Co., surmised that the EC might be loath to approve any transaction that eliminates a competitor from the market. Ross added, however, that the body rarely vetoes deals like this one.
He did speculate that as a condition of approving the deal, the EC might require a divestiture of assets in countries where the two firms have significant market concentration. He would not comment on which countries would be ripe for divestiture.
UPS said in its statement that parcel competition in Europe is already brisk because it involves "multiple players who offer similar services." UPS said the combined entity would actually enhance the continent's competitive landscape by creating a "more efficient logistics market."
TNT Express' strength is its intra-European business, though it also serves the intra-China, Southeast Asian, and Brazilian markets. Its U.S. operations are confined to connecting the country to international markets. And even there, the company's footprint is almost nonexistent.
Ross, for one, is not keen on the deal, saying that beyond the cost of the purchase, the subsequent integration would be expensive and more difficult to execute than UPS assumes. UPS already has a significant and profitable presence in Europe, and the company would be better off growing its Asian and Brazilian operations in-house instead of buying TNT Express' "second-rate operations" in those markets, he said.
Keep away from FedEx?
Many of those following the deal have speculated that UPS' move on TNT Express was partly motivated by a desire to keep it out of FedEx's hands and block its rival from establishing a major foothold in Europe via a major acquisition.
FedEx, for its part, has expressed no interest in a counter-offer, saying it could grow nicely in Europe through organic expansion and smaller, more targeted acquisitions known in the trade as "tuck-ins."
The other major player in the market, DHL, has been silent on its intentions so far. Experts say it is doubtful DHL will make a bid for TNT Express for fear of raising the ire of European antitrust regulators. However, DHL and its owner, German postal and logistics giant Deutsche Post, wield significant influence in Brussels. Both could use their combined heft to either get the deal blocked or force conditions on UPS that could dilute the impact of controlling more than 30 percent of the intra-European parcel market.
DHL could have other, more personal motivations to block a UPS-TNT Express deal. In 2003, UPS opposed DHL's proposed acquisition of Airborne Express, then the third-largest U.S. parcel carrier. The transaction was eventually approved. According to those close to the transaction, UPS' opposition still rankles, even though in retrospect DHL would have been better off walking away as the acquisition set the stage for six years of multi-billion dollar losses that eventually led DHL to abandon the domestic U.S. market.
If the current deal is blocked, it would be hard to fathom TNT Express' staying independent for long as its competitiveness has faltered in recent years. When the company was split off from the Dutch postal system in May 2011, rumors swirled that it was put on a standalone basis to prep it for sale. By mid-2011, TNT Express' stock had plunged to multi-year lows as it sustained large losses due to the contraction in Europe and operating costs that spiraled out of control.
In addition, Marie-Christine Lombard, who was CEO at the time the deal was announced, suddenly resigned at the end of September to pursue interests outside the industry. The timing of her decision was not warmly received by the company's supervisory board. "It is regrettable that Marie-Christine has decided to leave TNT Express now," said Antony Burgmans, its chairman, at the time her resignation was announced.
These events seem to have affected the company's internal culture as well. A parcel industry executive who spoke on condition of anonymity said inertia has set in as TNT Express waits to be sold. In the meantime, the company risks becoming—if it already hasn't--the fourth player in a three-chair European parcel game.
"I think TNT had been on cruise control for a long time just waiting to be sold to somebody, and therefore has lost vision and mission and internal leadership," the executive said. "The senior guys just want their [compensation] packages so they can get on with life."
Supply chain planning (SCP) leaders working on transformation efforts are focused on two major high-impact technology trends, including composite AI and supply chain data governance, according to a study from Gartner, Inc.
"SCP leaders are in the process of developing transformation roadmaps that will prioritize delivering on advanced decision intelligence and automated decision making," Eva Dawkins, Director Analyst in Gartner’s Supply Chain practice, said in a release. "Composite AI, which is the combined application of different AI techniques to improve learning efficiency, will drive the optimization and automation of many planning activities at scale, while supply chain data governance is the foundational key for digital transformation.”
Their pursuit of those roadmaps is often complicated by frequent disruptions and the rapid pace of technological innovation. But Gartner says those leaders can accelerate the realized value of technology investments by facilitating a shift from IT-led to business-led digital leadership, with SCP leaders taking ownership of multidisciplinary teams to advance business operations, channels and products.
“A sound data governance strategy supports advanced technologies, such as composite AI, while also facilitating collaboration throughout the supply chain technology ecosystem,” said Dawkins. “Without attention to data governance, SCP leaders will likely struggle to achieve their expected ROI on key technology investments.”
The British logistics robot vendor Dexory this week said it has raised $80 million in venture funding to support an expansion of its artificial intelligence (AI) powered features, grow its global team, and accelerate the deployment of its autonomous robots.
A “significant focus” continues to be on expanding across the U.S. market, where Dexory is live with customers in seven states and last month opened a U.S. headquarters in Nashville. The Series B will also enhance development and production facilities at its UK headquarters, the firm said.
The “series B” funding round was led by DTCP, with participation from Latitude Ventures, Wave-X and Bootstrap Europe, along with existing investors Atomico, Lakestar, Capnamic, and several angels from the logistics industry. With the close of the round, Dexory has now raised $120 million over the past three years.
Dexory says its product, DexoryView, provides real-time visibility across warehouses of any size through its autonomous mobile robots and AI. The rolling bots use sensor and image data and continuous data collection to perform rapid warehouse scans and create digital twins of warehouse spaces, allowing for optimized performance and future scenario simulations.
Originally announced in September, the move will allow Deutsche Bahn to “fully focus on restructuring the rail infrastructure in Germany and providing climate-friendly passenger and freight transport operations in Germany and Europe,” Werner Gatzer, Chairman of the DB Supervisory Board, said in a release.
For its purchase price, DSV gains an organization with around 72,700 employees at over 1,850 locations. The new owner says it plans to investment around one billion euros in coming years to promote additional growth in German operations. Together, DSV and Schenker will have a combined workforce of approximately 147,000 employees in more than 90 countries, earning pro forma revenue of approximately $43.3 billion (based on 2023 numbers), DSV said.
After removing that unit, Deutsche Bahn retains its core business called the “Systemverbund Bahn,” which includes passenger transport activities in Germany, rail freight activities, operational service units, and railroad infrastructure companies. The DB Group, headquartered in Berlin, employs around 340,000 people.
“We have set clear goals to structurally modernize Deutsche Bahn in the areas of infrastructure, operations and profitability and focus on the core business. The proceeds from the sale will significantly reduce DB’s debt and thus make an important contribution to the financial stability of the DB Group. At the same time, DB Schenker will gain a strong strategic owner in DSV,” Deutsche Bahn CEO Richard Lutz said in a release.
Transportation industry veteran Anne Reinke will become president & CEO of trade group the Intermodal Association of North America (IANA) at the end of the year, stepping into the position from her previous post leading third party logistics (3PL) trade group the Transportation Intermediaries Association (TIA), both organizations said today.
Meanwhile, TIA today announced that insider Christopher Burroughs would fill Reinke’s shoes as president & CEO. Burroughs has been with TIA for 13 years, most recently as its vice president of Government Affairs for the past six years, during which time he oversaw all legislative and regulatory efforts before Congress and the federal agencies.
Before her four years leading TIA, Reinke spent two years as Deputy Assistant Secretary with the U.S. Department of Transportation and 16 years with CSX Corporation.
Serious inland flooding and widespread power outages are likely to sweep across Florida and other Southeast states in coming days with the arrival of Hurricane Helene, which is now predicted to make landfall Thursday evening along Florida’s northwest coast as a major hurricane, according to the National Oceanic and Atmospheric Administration (NOAA).
While the most catastrophic landfall impact is expected in the sparsely-population Big Bend area of Florida, it’s not only sea-front cities that are at risk. Since Helene is an “unusually large storm,” its flooding, rainfall, and high winds won’t be limited only to the Gulf Coast, but are expected to travel hundreds of miles inland, the weather service said. Heavy rainfall is expected to begin in the region even before the storm comes ashore, and the wet conditions will continue to move northward into the southern Appalachians region through Friday, dumping storm total rainfall amounts of up to 18 inches. Specifically, the major flood risk includes the urban areas around Tallahassee, metro Atlanta, and western North Carolina.
In addition to its human toll, the storm could exert serious business impacts, according to the supply chain mapping and monitoring firm Resilinc. Those will be largely triggered by significant flooding, which could halt oil operations, force mandatory evacuations, restrict ports, and disrupt air traffic.
While the storm’s track is currently forecast to miss the critical ports of Miami and New Orleans, it could still hurt operations throughout the Southeast agricultural belt, which produces products like soybeans, cotton, peanuts, corn, and tobacco, according to Everstream Analytics.
That widespread footprint could also hinder supply chain and logistics flows along stretches of interstate highways I-10 and I-75 and on regional rail lines operated by Norfolk Southern and CSX. And Hurricane Helene could also likely impact business operations by unleashing power outages, deep flooding, and wind damage in northern Florida portions of Georgia, Everstream Analytics said.
Before the storm had even touched Florida soil, recovery efforts were already being launched by humanitarian aid group the American Logistics Aid Network (ALAN). In a statement on Wednesday, the group said it is urging residents in the storm's path across the Southeast to heed evacuation notices and safety advisories, and reminding members of the logistics community that their post-storm help could be needed soon. The group will continue to update its Disaster Micro-Site with Hurricane Helene resources and with requests for donated logistics assistance, most of which will start arriving within 24 to 72 hours after the storm’s initial landfall, ALAN said.