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Ouch, that hurts. TNT Express shares fell 42 per cent on Monday after UPS pulled out of a €5.2-billion ($6.6-billion) deal to buy the company, citing a failure to get the deal past the EU competition authorities. At €4.80, TNT's shares are 25 per cent below the undisturbed priced before the deal was announced last March. At least investors can stop arguing about what sort of a bid premium was in the price before the deal. TNT's enterprise value is now six times its forecast earnings before interest, tax, depreciation and amortization, in line with FedEx but a discount to UPS on nine times.

It is tempting to see the collapse as a masterstroke from FedEx. Lacking the firepower to compete with UPS (its enterprise value is just over a third of UPS's), it refused to get into a bidding war last year. But it also refused to buy the parts of TNT that the EU wanted UPS to sell and, in doing so, contributed to the deal's collapse. With its biggest competitor for the assets now out of the way, FedEx can consider making an approach of its own.

But TNT shareholders should not hold their breath. True, TNT's 18-per-cent market share in Europe is attractive to FedEx, with only a 4-per-cent share. But that lack of overlap also means that it would not be able to squeeze out anything like the €400- to €550-million of cost savings that UPS promised, so would not be able to offer as much. And, even if FedEx decides it wants TNT, there is no reason to rush into things.

So TNT shareholders (including, no doubt, some furious merger arbs) will have to nurse their wounds for a while. At least the company will collect a €200-million break fee. And they can also console themselves with the fact that their company is slowly improving – its earnings are forecast to grow more quickly than those of UPS and FedEx both this year and next. Scant consolation, but a silver lining nonetheless.

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