By Laura Stevens 

For U.S. delivery companies, the European financial crisis is opening up new business opportunities. Let the jockeying begin.

FedEx Corp. on Friday submitted required regulatory filings to the European Commission necessary to move ahead with its previously announced deal to acquire parcel firm TNT Express NV for nearly $5 billion. Meanwhile, United Parcel Service Inc. last month said it is building in the Netherlands a new temperature-controlled distribution center specifically designed for pharmaceuticals and medical products, the latest in a string of expansion projects expected to total nearly $2 billion over five years.

Last month, UPS also opened a $40 million expansion in Nuremberg, Germany, a package-sorting location for goods to and from Southeastern Europe. FedEx is building a new airport operation in Copenhagen slated to open this year. Not to be outdone, DHL Express--the dominant European player by market share--is doubling the size of its Leipzig, Germany, hub, spending EUR150 million ($167 million).

While the European economy flounders, the delivery companies are reaping certain benefits. In particular, a weak euro means their dollar investments go further. Additionally, businesses in the depressed southern European nations have been forced to look further afield for business, which often leads to more cross-border shipments.

"There's a pizza on the table, and everyone is trying to have a piece of it," said DHL Express Europe CEO John Pearson, adding his company also is investing in its home region.

UPS is keeping a close eye on FedEx's acquisition of TNT after i ts own attempt to acquire the Dutch company failed in 2013. So are investors. While FedEx has said it is sure the deal will win the necessary approvals, recent comments by the European Union's top antitrust official signal it could face closer scrutiny than had been expected.

The EU's antitrust chief, Margrethe Vestager, who took office in November, has warned repeatedly that she would look closely at large mergers that could lead to higher prices for consumers.

Tough economic times are forcing even small and midsize companies to revamp domestic supply chains that, in some cases, were designed before 1995, when an EU agreement allowed internal border controls to come down, facilitating the free movement of trade. That is good news for UPS, FedEx and DHL.

"The recession created a catalyst for streamlined supply chains," said UPS's Kurt Kuehn in an interview with The Wall Street Journal shortly before stepping down as CFO on July 1. "Europe is getting a wake-up call: It has to change to remain competitive."

Some big companies, for instance, are consolidating warehouses and truck fleets they maintained country by country.

The changes have increased the logistical complexity of European supply chains, which has benefited the delivery companies, since FedEx, UPS and DHL all offer logistical expertise. It is a "transformation away from freight movements to smaller shipments," Mr. Kuehn added.

Before the crisis, there wasn't as much incentive to change, Mr. Kuehn said, in part because European labor law makes it expensive to restructure a workforce.

In addition, e-commerce has picked up. Entrepreneurs and small businesses in Southern Europe--where unemployment remains high and consumer spending has stalled--are increasingly looking outside their countries' borders to sell their wares, according to delivery company executives. Demand has increased overall for European e-commerce as consumers elsewhere in the world take advantage of the cheaper euro to get more bang for their buck.

E-commerce retail sales in the U.K., Germany, France, Sweden, the Netherlands, Italy, Poland and Spain are expected to grow more than 40% over two years to GBP185.44 billion ($289.60 billion) in 2016, according to a study by U.K.-based Centre for Retail Research and funded by RetailMeNot Inc. U.S. e-commerce sales are forecast to grow a slower 30% over the same period to nearly $400 billion.

"Europe, despite the fact that there has been low growth, is still an enormous market, both for import-export and within the European Union overall," said FedEx Chief Executive Fred Smith on a conference call with analysts after the TNT announcement in April.

UPS is currently second in European international express market share following Germany-based DHL, a part of Deutsche Post AG.

FedEx would become the third largest player if it acquires TNT, which currently holds that position. But FedEx's competitors are already taking some jabs at the TNT deal. DHL's Mr. Pearson said regulators likely would have some questions.

UPS's Mr. Kuehn, noting the size of the proposed FedEx-TNT deal, said: "We just want to make sure that the European regulators give it as deep of scrutiny as they did with us, certainly....It is a complex deal with a lot of moving parts." Adding TNT's annual revenue to FedEx's would mean about a 16% increase to nearly $55 billion combined.

FedEx said Friday it expects the deal to close in the first half of 2016. Executives, on an analyst call in June, said they don't believe that the deal faces any EU competition issues.

But regulators are cautious when approving transactions that bring the major number of competitors in the market to three from four due to the potential for higher prices. In addition, about 18 other countries need to approve the deal, including China and Brazil.

Because it has a smaller European network than UPS and less overlap with a since-weakened TNT, FedEx has said the scenario is far different from UPS's failed acquisition attempt. The UPS deal collapsed in part after it failed to find what regulators deemed appropriate buyers for some assets it needed to shed due to competitive reasons.

Tom Fairless contributed to this article.

Access Investor Kit for Deutsche Post AG

Visit http://www.companyspotlight.com/partner?cp_code=P479&isin=DE0005552004

Access Investor Kit for TNT Express NV

Visit http://www.companyspotlight.com/partner?cp_code=P479&isin=NL0009739424

Access Investor Kit for Deutsche Post AG

Visit http://www.companyspotlight.com/partner?cp_code=P479&isin=US25157Y2028

Access Investor Kit for FedEx Corp.

Visit http://www.companyspotlight.com/partner?cp_code=P479&isin=US31428X1063

Access Investor Kit for TNT Express NV

Visit http://www.companyspotlight.com/partner?cp_code=P479&isin=US87262N1090

United Parcel Service (NYSE:UPS)
Historical Stock Chart
From Feb 2024 to Mar 2024 Click Here for more United Parcel Service Charts.
United Parcel Service (NYSE:UPS)
Historical Stock Chart
From Mar 2023 to Mar 2024 Click Here for more United Parcel Service Charts.