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TNT Deal Will Enhance FedEx’s Moat Over Time

FedEx's $4.8 billion bid for TNT will combine two firms with quite different strengths while boosting global delivery cost advantages, writes Morningstar analyst Keith Schoonmaker.

We don’t expect the European Commission to forbid the deal, as it did when

FedEx had previously indicated a lack of interest in TNT due to the price, slow EU growth, and questionable cultural fit. Clearly the euro-U.S. dollar exchange rate made the price more attractive, FedEx believes the EU is poised for growth, and FedEx now believes cost and revenue synergies outweigh the integration effort. FedEx does not need to aggressively rationalize redundant facilities, vehicles, and personnel, nor wait for lengthy employment contracts to expire in order to rightsize the acquisition on a massive scale. A greater number of hubs and drop-off locations may win greater share in shipments to and from the EU due to offering later pickup and earlier delivery.

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About the Author

Keith Schoonmaker

Sector Director
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Keith Schoonmaker, CFA, is director of industrials equity research for Morningstar Research Services LLC, a wholly owned subsidiary of Morningstar, Inc. Before assuming his current role in 2012, he was an equity analyst covering the transportation industry.

Prior to joining Morningstar in 2007, Schoonmaker worked for more than a decade in product development and consulting in the paper industry.

Schoonmaker holds a bachelor’s degree in chemistry from Wheaton College and a master’s degree in business administration from Northwestern University’s Kellogg School of Management. He also holds the Chartered Financial Analyst® designation. In 2011, he ranked first in the industrial transportation industry in The Wall Street Journal’s annual “Best on the Street” analysts survey.

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