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D. Post bags $1bn ground unit
SEATTLE (Reuters) -- Deutsche Post unit DHL Worldwide Express will buy the ground delivery business of U.S. freight shipping giant Airborne Inc, creating a key player for a price of about $1.05 billion, the companies confirmed on Tuesday. The deal, which forms a tougher rival to market leaders FedEx Corp. and United Parcel Service Inc., is expected to close during the summer of 2003, America's No. 3 freight shipper and DHL said in a joint statement. Upon completion of the acquisition, Airborne's air operations will be separated from the company's ground operations and will become an independent public company, called ABX Air Inc, the statement added. In a move possibly aimed at keeping within U.S. laws prohibiting foreign ownership of domestic airline assets, ABX Air will be wholly owned by Airborne's shareholders, who will each receive one share of ABX Air for every Airborne share they hold, the statement said. Based on Airborne's Monday closing share price of $18.05, DHL's cash bid represented a premium of about 18 percent. The bid was first mooted on Monday when both Airborne and Brussels-based DHL confirmed they were holding talks. Carl Donaway, Airborne chairman and chief executive said in the statement, "the UPS/FedEx duopoly has a 79 percent share of the U.S. express delivery market, and the combination of DHL and Airborne will create a much stronger competitor." The deal, subject to shareholder and regulatory approval, sees Deutsche Post, the European postal, logistics, banking and express group, expanding further into the highly competitive U.S. market, just as a skittish economy and rising fuel costs jolt the industry. The U.S. ground operations of Airborne and DHL will operate under the DHL brand, the companies said. They added that on completion of the transaction, ABX Air and DHL will enter into "arms-length" commercial agreements that will govern their relationship. The agreements will include an aircraft, crew, maintenance and insurance pact under which ABX Air will provide air service to DHL's ground business. Uwe Doerken, DHL Worldwide chief executive officer said DHL looked to capitalize on the "under-served small- and medium-sized business segments." "We are prepared to make a substantial long-term marketing investment to build a strong competitor," he added. Copyright 2003 Reuters. All rights reserved. This material may not be published, broadcast, rewritten, or redistributed.
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