2nd UPDATE: TNT Express Rejects Offer From UPS

AMSTERDAM -- TNT Express NV (TNTE.AE) Friday said it remains in talks with United Parcel Service Inc. (UPS) about a potential takeover after it rejected an unsolicited offer by its U.S. rival that would value the Dutch logistics company at near EUR5 billion, or about USD$6.5 billion.

UPS confirmed it made a "revised, increased and comprehensive" proposal of EUR9 a share for TNT on Feb. 11. A spokeswoman for the Atlanta-based shipping company declined to say when it first made the offer.

Economic and financial turmoil in Europe has put a damper on the appetite of U.S. companies for European acquisitions, and a purchase of TNT Express either by UPS or fellow U.S.-based shipping giant FedEx Corp. (FDX) would be the largest such purchase since Hewlett-Packard Co. (HPQ) agreed to buy Autonomy Corp. for $11.7 billion six months ago, according to Dealogic.

TNT said its supervisory and executive boards had carefully considered the UPS indicative proposal but decided to reject the bid. It wouldn't comment further but said it would update investors on its overall strategy Tuesday, when it reports fourth-quarter earnings.

TNT shares closed Friday at EUR6.34, up 2.6%, valuing the company at EUR3.5 billion. Word of the offer came after the market closed. In the U.S., TNT's American Depositary Shares were up 54% at $12.45.

Rumors of TNT being approached by U.S. rivals UPS and FedEx have surfaced regularly in recent years but were never confirmed any of the companies involved.

TNT Express -- which was split from Dutch mail company PostNL NV (PNL.AE) in May 2011 -- has come under increased pressure from shareholders who have wanted it to more actively explore strategic options, including a sale of the company. Profit warnings last year further alienated management from shareholders.

A FedEx spokesman declined to comment Friday on the UPS bid for TNT Express. In March 2011, FedEx Chief Financial Officer Alan Graf called the business "too expensive" in response to a question at an investor conference regarding his company's interest in it, although Graf's remarks came prior to TNT's breakup from PostNL NV.

Since then however, both UPS and FedEx have been wrestling with a slowdown in the once-booming growth rates in Asia-to-U.S. package volume. Both companies have said Europe has held up relatively well in comparison.

"Europe continues to be a good story," UPS Chief Financial Officer Kurt Kuehn said on the company's fourth-quarter conference call in January, noting that shipments within Europe climbed in the "upper single digits" on a percentage basis.

The volume of European acquisitions by U.S. companies fell to $80.8 billion in 2010 from $132.2 billion in 2007 -- the height of the last M&A boom -- according to Dealogic.

Even though last year there was a rebound to $121.1 billion, many of those deals took place before increased worries about a collapse of the euro crimped activity anew later in the year. So far this year, just $3.9 billion of deals had been struck.

Still, bankers say that U.S. companies are interested in deals in Europe, especially in relatively stronger countries such as the Netherlands and Germany, and in cases where the stocks of target companies have been beaten down. Should recent improvements in investor sentiment continue, they expect more U.S. companies to make moves on their European counterparts.

PostNL NV has retained a 29.9% stake in TNT Express. Since the breakup, TNT's operational performance has deteriorated, resulting in PostNL being unable to pay its shareholders a cash dividend.

UPS shares were down 18 cents, or .18%, at $76.62 in recent trading.

TNT Express shares have fallen over 30% and PostNL's have declined almost 60%. On a standalone basis, analysts value TNT Express at up to EUR5 billion, rising to EUR7.5 billion if rival bidders were to compete for the company.

A spokesman for TNT Express said the company decided to make UPS' interest public following indications the talks with UPS might have leaked to media.

-By Robin van Daalen, Dow Jones Newswires; +31 20 572 52 01; robin.vandaalen@dowjones.com

--Bob Sechler and Dana Cimilluca contributed to this article.

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