Dutch mail firm TNT has agreed to sell its underperforming logistics business to US-based private equity fund Apollo Management for 1.48 billion euros ($1.9 billion), it said on Wednesday.
The deal is valued on a cash and debt-free basis, and TNT said it will receive 15 million euros of the proceeds in the form of a 5 percent equity stake in the new logistics company.
"This transaction is an important milestone ... and will enable us to fully focus on growing our core network business," TNT Chief Executive Martin Bakker said in a statement. TNT said it expected to return most of the deal's net proceeds, which the company estimates to be between 1.2 billion and 1.3 billion euros, to shareholders via a share buyback programme of up to 1 billion euros.
The company expects to complete the share buyback plan in 2007 and use the rest of the proceeds to "solidify our balance sheet further" and pay down debt, Bakker said on a conference call. He added that TNT would also step up its investments.
After trading slightly higher on Wednesday morning to touch a three-month high of 29.73 euros, TNT shares slipped at midday and were down 2.9 percent at 28.33 euros at 1409 GMT.
"TNT now is a much more focused enterprise which is stepping up its growth level," said Thijs Berkelder, analyst at brokerage Petercam, adding that TNT could now grow faster as a mail and express carrier in Europe. Petercam rates TNT shares "buy".
TNT shares trade at about 14.7 times expected 2006 earnings versus a multiple of 10.6 times for its bigger German rival Deutsche Post, with analysts attributing the premium to take-over speculation.
TNT announced in December its intention to sell its logistics activities to concentrate on mail and express delivery, which has 36,000 employees and represents about a quarter of group revenue. TNT said that the division, which operates in 28 countries, is the No 2 logistics company in the world.
The Dutch firm said it hoped to close the deal - still subject to approval by TNT shareholders and regulatory clearance - before the end of the year. TNT said that one of its management board directors, Dave Kulik, will resign and become CEO of the new company.