| LONDON/NEW YORK
LONDON/NEW YORK Dutch delivery firm TNT Express TNTE.AS is not expecting U.S. rival FedEx (FDX.N) to trump a 4.9 billion euros ($6.5 billion) takeover bid from United Parcel Services (UPS.N), a source close to TNT said on Thursday.
TNT last week rejected a 9 euros per share cash offer from UPS, the world's largest package delivery company, but is still in talks with its U.S. suitor.
TNT's shares jumped to an all-time high of 10.24 euros this week partly on hopes that FedEx, which has flirted with the idea of buying TNT for years, might trigger a bidding war.
"The last discussion we had with them (FedEx) didn't give us the impression that they were ready to make a move," the source said, adding he had sounded out FedEx's intentions very recently.
While FedEx sees strategic value in combining with TNT, it feels the price has become too expensive to do a deal at this point, another source close to the situation said.
The sources asked not to be identified because they were not authorized to speak with the media.
FedEx and TNT declined to comment.
Some analysts said FedEx could be better off scooping up assets that competition regulators might require UPS to sell if it succeeds in winning over its Dutch target.
Sources close to the talks between UPS and TNT said a combined firm would need to make significant asset sales in Europe - the Netherlands, Britain and Germany in particular - to win regulatory approval.
"You could see some assets that are displaced or some market share opportunities that come from the deal as well that could benefit FedEx," said Benjamin Hartford, senior research associate at Robert W. Baird.
UPS HAS UPPER HAND
FedEx has the financial wherewithal to make a counter bid for TNT. But its lower valuation than UPS could make a deal more difficult to sell to its shareholders, a banker familiar with FedEx's thinking said. Its smaller presence in Europe also means it may not be able to make as many cost savings.
UPS shares trade at 9.8 times current-year earnings before interest, tax, depreciation and amortization (EBITDA), while FedEx trades at just above 6 times, Reuters Starmine data shows.
With a market capitalization of $28.5 billion, FedEx also has a weaker balance sheet than the $73 billion UPS.
FedEx has a negligible 3 percent market share in European delivery, a third of what UPS claims, making it harder for FedEx to make savings from a deal.
TNT is the market leader in Europe with an 18 percent share, followed by Deutsche Posts' DHL at 15 percent.
"It's hard for FedEx. UPS has been watching this for a really long time, and they're pretty well positioned to buy this," said one sector banker who is not directly involved in the situation.
"You could argue that FedEx gets involved only to make it more expensive for UPS, but I don't think FedEx will make a proposal if they don't have the intent to really buy that."
The source close to TNT thought the most likely scenario was that UPS would eventually sweeten its offer to win over TNT.
Deutsche Bank analysts said FedEx could focus instead on making several smaller acquisitions in select markets or explore a joint venture with DHL, where FedEx would leverage DHL's presence in Europe and DHL could leverage FedEx's strength in the United States.
FedEx has said in the past it plans to grow in Europe organically and with small "tuck-in" purchases. Its focus over the next 10 and 20 years has been and will continue to be developing in Asia, according to analysts.
"We really think the company has been more focused on trying to find higher growth regions than Europe, which we would expect to grow at a pace no greater than what the U.S. would grow," said Morningstar analyst Keith Schoonmaker.
(Additional reporting by Lynn Adler and Paritosh Bansal in New York. Editing by Mark Potter)