Deutsche Post grabs UK Mail in e-commerce parcel delivery race

Frankfurt (Reuters): Deutsche Post DHL is buying independent British postal operator UK Mail Group for £ 243 million pounds ($ 316 million) to cement its foothold in Europe’s three largest e-commerce markets, Britain, Germany and France.

European postal firms are having to cut their costs and invest in new technology and services as they try to stay ahead of new entrants in the lucrative parcel delivery market such as US online retailer Amazon.com.

The cash offer from Deutsche Post, the world’s biggest mail and logistics group, was recommended by UK Mail’s directors, the two companies said on Wednesday.

Deutsche Post said the 440 pence per share bid represented a 43% premium to UK Mail’s three-month weighted average share price, and it had undertakings from shareholders holding about 60% of the company to accept the offer.

UK Mail shares jumped 43% to 440.25 pence, while Deutsche Post’s rose 1.2% to 27.94 euros, broadly in line with the German blue-chip DAX.

“The on-going expansion of our parcel network in Europe is driven by increasing demand within our e-commerce customer base for cross-border deliveries,” Deutsche Post board member Juergen Gerdes said in a statement.

UK Mail, which is focused on business customers, last year launched a new hub in Coventry with machinery it said enabled it to handle 24,000 parcels an hour - four times as many as before.

The market has seen a wave of consolidation in recent years. Among other, US-based FedEx agreed to buy Dutch TNT Express last year for 4.4 billion euros, catapulting it to second place in Europe ahead of UPS.

Deutsche Post’s bid takes advantage of a slump in UK Mail’s share price, which has fallen by a third over the last two years.

“The board believes that UK Mail... will be better positioned to continue to develop our parcels and mail businesses with the benefit of Deutsche Post DHL’s greater financial and operational resources,” UK Mail Chairman Peter Kane said in a statement.

Deutsche Bank advised Deutsche Post and UK Mail was advised by Investec.