19 March 2012 Last updated at 05:25 ET

UPS agrees $6.8bn TNT deal as it seeks Europe expansion

TNT was spun off from Dutch mail company PostNL in May last year

Package delivery firm United Parcel Service (UPS) has agreed to buy rival company TNT in a 5.2bn-euro ($6.8bn; £4.3bn) deal.

The Dutch firm has accepted an improved bid of 9.5 euros a share, a 54% premium on its closing price of 6.18 euros on 16 February, the day before the two firms announced they were in talks.

The takeover is being seen as a move by UPS to expand its business in Europe.

UPS is the world's largest package delivery company.

"The complementary strengths of both organisations will create a customer-focused global platform that will be a leader in transportation technology and customer service," the companies said in a joint statement.

Europe expansion

UPS has been trying to break into the European market, which is currently dominated by TNT and Germany's DHL.

The company said its deal with TNT underlined its "long-standing commitment to Europe".

The acquisition of TNT is not only likely to boost UPS's market share in Europe, but will also provide it with additional infrastructure to grow its business further.

According to a report on the Dutch firm's website, its European air network has a fleet of 50 aircraft connecting 65 destinations.

It also operates a road freight network that connects all 38 European countries.

"The integration of TNT Express' leading intra-Europe road freight network will expand UPS's logistics solutions in Europe," the two companies said.

Global footprint

The benefits of the deal to UPS are not just limited to Europe.

The merger of the two firms is likely to give UPS a much stronger hold in the fast-growing markets in Asia-Pacific, including China, where TNT has set up vast delivery network.

In terms of package delivery from Asia-Pacific to Europe, DHL is the dominant player, with more than 30% market share, followed by FedEx which has 25%, according to data available on TNT's website.

Both UPS and TNT have individually lagged behind the competition. However, as the two firms join hands, their combined market share of 28% will make them the second-biggest in the region and pose a serious challenge to DHL for the top slot.

"The proposed transaction will create additional value for UPS's shareholders by accelerating UPS's international growth, further connecting the world," UPS and TNT said.