DEUTSCHE Post, Europe's biggest postal service, is buying British logistics rival Exel in a GBP3.7bn deal intended to give the company a foothold in the UK supply chain management market.
The widely-anticipated acquisition comes as Deutsche looks to diversify away from its dependence on domestic mail delivery - a monopoly operation the company is destined to lose in around two years.
Deutsche, which is headed by chief executive Klaus Zumwinkel, has made no secret of its desire to become the world's leading logistics company. Buying Exel gives the company a leading position in contract logistics from Europe to the US and Asia and constitutes the group's largest ever acquisition, trumping its 2002 purchase of parcels group DHL.
The deal will comprise cash and new Deutsche Post shares, valuing each Exel share at 1244p, with about 72-per cent of the transaction to be funded with cash. The price is a 24-per cent premium from September 1when the two companies first confirmed they were talking.
Once the deal is completed, the German group intends to turn Exel into its logistics brand, while DHL will represent the company's express delivery operations.
The merger, which has won the support of directors from both companies but still requires shareholder approval, will create a company with a combined workforce of around 500,000 people.
Exel has more than 110,000 staff world-wide and is best known for handling logistics operations for retailers such as Marks & Spencer, Boots and Sainsbury. It also has a freight management operation.
Rival suitors could yet emerge, with Deutsche said to be eager to complete the transaction to thwart a possible bid from United Parcel Services, the package-delivery firm.
TPG, the Dutch logistics group, has also been tipped as a potential predator. TPG owns the TNT delivery business which operates in the UK.
John Allan, who has been Exel's chief executive since 2000, will head the integration process and will run the enlarged logistics division, a post which includes a seat on the Deutsche board.
He said the firm was offering a full and fair price, adding that Exel had not received any rival approaches but would consider any that were tabled.
"Completion of this offer would create the leading global player in logistics and accelerate progress towards our strategic goals, " he said:
The deal for Exel is the largest involving a FTSE-100 index company since the takeover of drinks firm Allied Domecq by French rival Pernod Ricard. ScottishPower is also being stalked by German rival E.On.
Dresdner Kleinwort Wasserstein stuck with its "hold" recommendation on Exel stock following news of the takeover offer from Deutsche.
Following suit was Smith Barney, which said there was a "slim chance" of a counter bid for the UK company.
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