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Royal Mail rises on talk of possible sector takeovers

Discussion in 'Market News' started by Lily, May 31, 2016.

  1. Lily

    Lily Forum Member

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    News of - failed - talks between Bpost and PostNL puts spotlight on postal groups

    Despite Belgium’s Bpost and Dutch postal group PostNL failing to agree terms for a takeover of the latter, news of their talks has put the spotlight back on possible consolidation in the sector.

    In the UK Royal Mail, which was linked with PostNL in December, is up 7p at 539.5p in a downbeat market. Analysts at Credit Suisse said talk of mergers and acquisitions in the European postal sector is growing but they are cautious about the prospect, given declining traditional mail volumes and limited scope for synergies. They said:

    Royal Mail seems a more likely driver of consolidation than Deutsche Post DHL but we do not see an obvious acquisition candidate: We do not expect DHL to make meaningful acquisitions given its prioritisation of organic growth. However, Royal Mail is focused on adding new revenue streams (even from maintaining third party vehicles) so may have more appetite to consolidate the fragmented UK parcel market where overcapacity runs at 20% (potentially difficult from a regulatory perspective given its 50% share and Ofcom’s focus on healthy competition) or even to boost GLS prospects in the European B2C express market once a UK labour deal is achieved.

    With 2016 net debt 0.2 times adjusted EBITDA, Royal Mail’s financial position is strong. This said, we have previously highlighted our doubts about PostNL’s abilities to add value to Royal Mail while we do not see obviously acquirable candidates among RMG’s key parcel competitors (DPD owned by La Poste, Hermes owned by otto group, Yodel 5%-owned by Amazon and TNT Express now part of FedEx).

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