TNT Express (NL0009739424) – “post mortem”
As it is commonly known, free lunches are few and rare in the stock market.
Another proof for this was last week’s termination of the TNT Express takeover by UPS.
I was quite lucky that I didn’t join in the “trade“, despite considering it quite seriously. My final decision was based on the believe that in such a “crowded” market like merger arbitrage, if a situation looks too good to be true, most likely it isn’t true.
Interestingly enough, a lot of “players” must still have believed in the deal. Looking at the chart, we can see that TNT is now trading relatively close to the lower bound of the “undisturbed” price before UPS came up with the bid:
As discussed in the previous post, at the current level, TNT Express is still not cheap, for instance compared to FedEx.
On the other hand, UPS seems to have been better off without TNT Express if we believe in “Mr. Market” as they have outperfomed the Dow Jones by almost 10%:
To me, this looks like that the offered price of 9,50 EUR was way too high and UPS realized this at some point in time and did not really try hard to get the deal through. For a company like UPS, blaming it to the EC is always a “face-saving” possibility.
However that also means that the price tag of UPS might never be reached again, even if FedEx would show up as potential buyer. On the other hand, TNT Express might still benefit by being spun off from POstNL which is crippled by pension liabilities and the terminally declining mail business.
PostNL Was even hit harder, dropping to a new all time low:
This might have to do also with Moody’s recent downgrade.
At the moment, both, PostNl and TNT Express are too much “hot potato” type investments, but it is definitely something for my “special situation” watch list. I think it will be especially interesting to see if TNT Express is able to turn around the business on a standalone basis.
Alsi for the future, I think it is the safest to keep away from Merger Arbitrage situations for my special situation “bucket”, as this requires very special skills which I do not have.
It seems that French activist investor Lutetia is trying to start a campaign for PostNL. This could bcaome interesting at some point. Lutetia also showed up (quite succesful so far) in the SIAS Spa case.