TNT! I'm DYNAMITE! Part II

TNT plans logistics unit sale

Dutch mail and global logistics provider TNT said today it plans to sell off its logistics unit TNT Logistics to focus on its mail, express and freight management sectors.

TNT did not disclose if it is in talks with any buyer, but said that it expects to complete the transaction, subject to shareholder approval, in the second half of 2006. TNT has appointed Goldman Sachs to assist in the sale.

TNT's share price on the Amsterdam stock exchange Euronext was up 6.34 percent to euros 24.99 ($29.48) at close of business today.

"While our logistics business is a strong operation with a talented group of employees and good customer relationships, it will no longer fit with our strategic focus going forward," said Peter Bakker, TNT's chief executive officer. "Given industry consolidation, we announce today our intention to sell our logistics business. The focus on networks and the exit of Logistics will allow simplification of our organization. In the next few months a plan aimed at further cost reductions will be put together."

TNT has logistics contracts in North America, Latin America, Europe, Mediterranean, Indian subcontinent, Far East and Australia.

TNT Logistics posted revenue of $5.5 billion in 2004, almost two-thirds of the group's total $17 billion operating revenue. Yet the logistics unit's $122 million operating profit only amounted to 8 percent of the groups total $1.6 billion operating profit for last year.

"We have come to the conclusion that high-quality networks have proven to be intrinsically more attractive than customer dedicated supply chains. In networks like Mail, Express, and Freight Management, TNT can drive increased volumes across infrastructures resulting in continually improving efficiency, operating leverage, and higher return on capital," TNT said in a statement.

ING analyst Andrew Beh mentioned UPS, Deutsche Bahn and private equity firms as potential suitors for TNT Logistics, according to Reuters. At the same time, TNT initiated a 1 billion euros ($1.2 billion) share repurchase program, which will recoup approximately 42.6 million ordinary shares.

TNT said it will use the proceeds from the sale of TNT Logistics "to make further share repurchases, pay dividends, or to invest in compelling value creating opportunities."

Is it UPS? Is it DB? Could DPWN make another huge investment after the Exel deal? 2006 is going to be a very interesting year...