Deutsche Post Snaps Up UK Mail for $315 Million -- Update

By Natascha Divac and Ulrike Dauer 

FRANKFURT--Germany's Deutsche Post DHL Group agreed to acquire UK Mail Group for 242.7 million pounds, ($315.5 million), bolstering its presence in one of Europe's biggest e-commerce markets at a time of booming online orders for clothes, household goods and other merchandise.

Deutsche Post, Europe's leading parcel-delivery company, said the offer of 440 pence a UK Mail share represents a premium of around 43% to the British company's closing price of 307.5 pence on Sept. 27.

UK Mail's directors intend to recommend unanimously that shareholders vote in favor, Deutsche Post said.

"With this acquisition, we will further extend our network and have a strong foothold in Europe's three largest e-commerce markets, the U.K., Germany and France, which account for over 60% of online retail in the continent," said Jürgen Gerdes, board member at Deutsche Post.

The deal comes amid frenetic recent corporate activity in the logistics sector, particularly in Europe where global industry leaders United Parcel Service Inc., FedEx Corp. and Deutsche Post are jockeying for position. At the same time, new players are entering the market, notably Amazon.com Inc. itself, which is laying the groundwork for its own shipping business in the U.S.

In January, Deutsche Post bought a 27.5% stake in France's Relais Colis to strengthen its presence in Europe's third-largest e-commerce market. In September, the German company expanded its parcel network to include ventures in Hungary and Slovenia, taking its presence to 19 European countries, a company spokesman said.

Earlier this year, FedEx acquired Dutch package-delivery company TNT Express in May for nearly $5 billion. The merger allowed FedEx to acquire an extensive ground network in Europe, making it a stronger competitor to UPS, which had tried and failed to buy TNT itself, and Deutsche Post's DHL unit.

Deutsche Post's U.K. move also represents the latest in a series of foreign mergers and acquisitions by German companies.

According to Dealogic, 2016 is on track to be the biggest year for German outbound M&A since 2007, boosted by Bayer's planned $57 billion acquisition of Monsanto Co., and recent acquisitions by Fresenius SE and Lanxess AG.

The U.K. parcel delivery market has become increasingly competitive in recent years.

Deutsche Post's offer for UK Mail is partly opportunistic after the sharp recent decline in the U.K. company's share price over the past year amid technical problems with automated parcel-sorting equipment at a new facility it opened in Ryton, central England.

Buying UK Mail, which delivers letters and parcels, will bring Deutsche Post into competition with local players including Royal Mail PLC, the former state mail service that was privatized in 2013. UK Mail, which was founded as a taxi company in 1971 and mostly works with business customers, is also a Royal Mail customer, using the service for final delivery of its letters and parcels.

Deutsche Post said the acquisition, talks over which predated the U.K.'s June vote to leave the European Union, would deliver "significant synergy benefits."

--Rory Gallivan in London contributed to this article

Write to Natascha Divac at [e-mail] and Ulrike Dauer at [e-mail]

(END) Dow Jones Newswires

September 28, 2016 06:14 ET (10:14 GMT)

Copyright (c) 2016 Dow Jones & Company, Inc.