Good morning, and welcome once again to everyone in the room, and also everyone who's joining us via the webcast. I'll shortly be introducing you to our speakers today, who will be walking you through the key points of the announcement that was made this morning. After the presentation, there'll be plenty of time for you to ask questions, so please do keep your questions until then. Before I introduce you to the speakers, however, I'm first going to read a short legal announcement. I want to remind everyone listening that FedEx Corporation desires to take advantage of the safe harbor provisions of the Private Securities Litigation Reform Act. Certain statements in this conference may be considered forward-looking statements within the meaning of the Act.
Such forward-looking statements are subject to risks, uncertainties, and other factors which could cause actual results to differ materially from those expressed or implied by such forward-looking statements. For additional information on these factors, please refer to our press releases and filings with the SEC. To the extent that we disclose any non-GAAP financial measures in this conference, please refer to the investor relations portion of our website at fedex.com for a reconciliation of such measures to the most directly compatible GAAP measures. So with the legal formalities out of the way, I would like to make the introductions to the people here today. Representing FedEx, we have David Bronczek, who is President and CEO of FedEx Express, and we have next to him, David Binks, President of FedEx Express Europe, and effective today, CEO of TNT.
Morning.
I now turn the conference over to David Bronczek.
Okay. Thank you. Well, good morning, and welcome. It's truly a historic day. It was just over one year ago, for those that I recognize in the audience, that I was here promising news that FedEx had intended to acquire TNT Express. Today, I'm thrilled to announce, and very proud, that we are, in fact, acquiring TNT Express. Today is a truly remarkable day to celebrate the coming together of these two great companies and create an even stronger one going forward, and deliver more value than either of us could have done on our own. And most importantly, we sincerely welcome all the TNT employees to the FedEx family. But before we proceed with the presentation, I'd like for Tex Gunning, my very good friend, from TNT, to come up and say a few words on behalf of his team. Tex?
Thank you.
Thank you, Tex.
Thank you so much, David, for giving me an opportunity to say a few words. Obviously, I'm really proud to stand here next to FedEx, to my FedEx colleagues. FedEx is an incredible company. We've worked with them over the last 12, 13 months, and everything we thought about FedEx was indeed true. Highly competent people, highly affiliative people, highly constructive people, and I must say, we're really, really happy. TNT, of course, celebrates this year also its 70 years birthday. It started in 1946 in Australia. And of course, as all of you know, TNT, like, as it goes with a life of 70 years, went through its ups and downs. But ultimately, I think they got renowned and famous for its European road network and for its people network.
I'm absolutely convinced that this deal is the right thing for our customers, our people, and the industry. So I really wish all of you good luck. I'm absolutely thrilled with this. The TNT people are thrilled with this. This is a really nice merger. It is not a merger, but a coming together, I wish you all the best. So thank you.
Thank you, Tex.
Good luck, David.
Thank you.
Well, thank you, Tex, and it's again an honor and a privilege of mine to have gotten to know you and work with you closely. Tex is a truly professional, outstanding global world leader, and without your leadership, I am sure that we would have had many more bumps along the way. We are very excited about this opportunity, however. We have a very short little video about three minutes on the beginning stages of the integration of FedEx and TNT, and with that, let's roll the video.
Imagine a transportation company that offers customers the largest global air express fleet, comprehensive ground networks where customers need the most, and global solutions that meet their shipping needs, all made possible by a diverse team, people dedicated to making the world a better and more connected place. In 1946, a man named Ken Thomas started TNT with one truck and a dream to help customers get their products where they need to go. In 1973, Fred Smith had an idea that created a new industry, an airline just for express packages called Federal Express. They connected people and made the world smaller, establishing the fundamental pillars of what we know today as the global express industry, and creating the framework that has made today's e-commerce revolution a possibility.
Over the years, both companies developed loyal customer relationships throughout sending service and innovations like overnight express delivery with a money-back guarantee, online tracking, and the world's first internet shipping application. These companies, their reach, and the important role they play in connecting people and possibilities, growing exponentially since their beginnings. Thanks in large part to the people who have joined their teams as part of strategic acquisitions like Flying Tigers, Caliber, which we know today as FedEx Ground, and for TNT, Alltrans, and Jet Services, and others. As FedEx and TNT have brought companies and cultures together, the unifying force has always been people. And their commitment to customers and to each other, building brands and reputations that have seen both companies recognized as among the world's most admired and consistently as among the best places to work.
Both continue to use their vast experience, capabilities, and global reach to assist the world's communities and make the world a better place. Two cultures, both built on people, motivate each team member to deliver outstanding FedEx and TNT experiences. The shared passion for customers and quality fuels the bright future that's ahead. Now that TNT is a part of the FedEx family of companies, the combined teams will be able to realize new possibilities. That future starts with delivering what customers and team members need today. Bringing together these two companies will take time. During the course of this journey, everyone has a role to play. Whether it's delivering what customers and team members need today, or as teams work together to build combined solutions for the future, everyone is a vital link in the chain of success. The future begins today.
Let's welcome customers to a world filled with opportunity as together, our teams connect even more people and possibilities. This is the start of a new reality as FedEx and TNT join forces. Two teams, one vision.
As the video pointed out, FedEx was founded 43 years ago in Memphis, Tennessee, and I'm actually proud to say that this past April, I've been with this great company for 40 years, of the 43 years. TNT was founded 70 years ago in Australia, and of course, the headquarters are here in Hoofddorp. Both companies have an extensive reach. FedEx now serves more than 220 countries and regions around the world, linking more than 95% of the global GDP in one to three business days. The combined companies together is an almost unbelievable 400,000 team members now around the world. FedEx moves 11.5 million packages a day. TNT moves more than 1 million shipments a day. And together, we have more than 150,000 vehicles around the world.
FedEx has 657 aircraft around the world deployed, that makes us one of the top five airlines in the world. Impressive numbers side by side, for sure. But important to note that FedEx now has acquired TNT, and we will immediately begin the integration process. However, for both companies, we will continue to operate today as we have in the past. Strong focus on our customers and our people are going forward for our TNT employees and customers and FedEx. Together, these two companies will transform the worldwide express playing field, there is no doubt. Together, we have a complete portfolio of solutions now, combining the largest express international global business of FedEx with an unparalleled European road network, TNT. This provides customers greater global access, broader services, and extended portfolio solutions. Together, our future is incredibly bright.
Most importantly, the foundation of our company and TNT's is our fantastic people. Same culture, same drive, and determination to succeed in serving our customers around the world. Together, again, we'll unlock opportunities leading to global growth that benefits both FedEx and TNT team members around the world. Our nearly 400,000 team members from both FedEx and TNT will be able to access more opportunities for themselves also individually. Together, we will connect more people and more possibilities across the world. A connected world is, is in fact, a better world. This acquisition will build on the years of great work put together by FedEx and TNT team members throughout the years. FedEx has spent more than four decades expanding, simplifying our physical network that reaches around the world.
With the thoughtful and foresight of the rich experience of acquisition integration, which we have many, FedEx created the global network that we have today. FedEx is an industry leader. We know our customers have varied needs. We've continued to expand our service portfolio so that we can provide the right network for the right customer at the right cost.... We are growing our business at an incredible rate around the world. We are very proud of the new team members that now make up the FedEx family. So thank you, Tex, and all your team. With that, I'm now going to turn it over to our colleague here, David Binks, who's our President, CEO of FedEx Europe, and now TNT. David?
Hi, good morning, everybody. It's a real privilege to be here on such an exciting day and a historic day, I think, for not just both of our companies, but for our industry as a whole. FedEx is committed to Europe. This is a highly competitive marketplace with multiple strong players, and we are now a worldwide express operator that not only has strong roots in the U.S., but now strong roots as well here in Europe. We believe that acquiring TNT will propel our position and our positioning as a major competitor in this part of the world. In other words, an already global service has just become more global.
We've enhanced our global capabilities with a phenomenal European road network that connects more than 40 countries, and that's going to be good news for our customers, since this network will allow us to move goods faster and more reliably across borders and offer our customers more options and more choice. As a result, we believe that our customers today, both the FedEx and TNT customers, and the new customers that we hope to bring tomorrow, can improve their supply chain and identify new opportunities for growth, so that the growing intra-European business of FedEx will lead to increased revenues and increased profitability. At $60 billion, or EUR 53 billion, the European express market is a very large business, and it's a growing business.
We also know that e-commerce continues to be a significant growth factor, not just here in Europe, but around the world. Growth rates for intra-European e-commerce are estimated at around 15% per annum, and that will mean that it's an industry that will grow to EUR 609 billion in 2017. This acquisition offers significant opportunity in this marketplace for a combined FedEx and TNT. There's absolutely no question that our customers will benefit from the strong intercontinental network capabilities of FedEx and TNT, and the combination of the air and ground capabilities, which Dave touched upon. This deal is a strong fit with our steadfast commitment to serve the evolving needs of our customers globally and here in Europe. Our focus for the integration process will be to maintain the high quality of service that our customers have come to expect from both companies.
It'll be business as usual, but with the potential for a much broader reach and broader scope. We will continue to deliver the same outstanding service to our customers today as we did yesterday, and as we will do tomorrow. It's also important to understand that this is an acquisition that is based on potential growth, growth in a growing marketplace. As a result, for example, the major FedEx hubs that we have in Paris and in Cologne, as well as the TNT facility in Liège will all remain significant operations for the combined entity as we move forward. The details of how our operations will work together will be determined through the integration planning process, which really starts right now. So today is also a historic day for our employees, both from FedEx and TNT.
We expect our team members to experience more opportunities than either company could have provided separately, and that is a group of 400,000 team members of exceptional quality, on which we depend every day, on which our customers depend every day. This transaction is one of the most strategically important that we've experienced in the FedEx history. We also know from our experience of dealing with acquisitions and integrations, that they will take time. But it's right that we take the appropriate amount of time to get it right and to execute with absolute precision.
Effective today, the FedEx European headquarters are in Hoofddorp, in the Netherlands, and I think it's perhaps appropriate to say that with a FedEx HQ now in the Netherlands, we aspire to deepen the meaning of the phrase, and for the Dutch in here or the people from the Netherlands, you will have to excuse my pronunciation at this point. That we, we really do aspire to deepen the meaning of the phrase, "Nederland Transportland," as we see this country as an exceptional opportunity and gateway for Europe, not just through the ports, but through the outstanding logistics reputation that is present here in the Netherlands. Thank you very much. And Dennis, I think you will now open up our Q&A.
I thought it was perfect, by the way. Oh, can you judge?
...Thank you, David, and thank you, David. So I'm going to open the floor to questions, both from the room, but also from people who are attending via the webcast. Please, when you ask your questions, can you please introduce yourself with your name and the name of your media? And can I also please request that you ask your questions using the microphones that we will give you, so that the people who are attending this conference via the webcast can actually hear the questions that you're asking. So questions, please.
Yes, good morning. My name is Koos Schwartz. I work for a Dutch newspaper called Trouw. You were talking about new choices, new options, new possibilities. Can you mention some for your customers?
Yeah. Well, I, I'll go ahead and start. On a global basis, our customers around the world, Canada, where I used to reside, Asia, of course, Latin America, the United States, are always looking for a better ground network with a better cost structure to it, that provided them a better overall cost, if you will, from FedEx. So we've always aspired to that end. This is the best fit that we could possibly have imagined. In fact, I'll go back and tell you that when I was in Europe, as David is today, the president of FedEx Express Europe, back in the early 1990s and mid-1990s, TNT was my business partner back then. And I knew back then that the culture, the team, the service, the commitment was very, very similar to ours.
The advantage they have, of course, is the tremendous road network that Tex and his team have put together over the years. That is a very low cost, very high quality, network that will augment everything in Europe, but every other customer around the world.
Let me just add a couple of points to what Dave said, or a couple of comments to what Dave said. First of all, I think it's a great opportunity for us to connect a larger group of customers and to faster deliveries to more parts of the world. I think the express network that we will provide will help that capability.
Is his microphone not working?
Is it working now? Okay. I just need to get a lot closer to it, obviously. I think the other thing is that with the combination of the Air Express network and the road networks that TNT have, and also many of the domestic services that TNT have around Europe, then there's the opportunity for us to combine together the express capabilities, and as Dave said, the ground capabilities or the road-based capabilities, to give customers more choice of faster delivery, or if they prefer, for parcels and freight, more economical delivery, which may take... Which may be more economical in terms of the speed of delivery. I think the final piece I would add as well is, over the last couple of years, we made a number of other acquisitions as well.
The acquisition of Bongo International is a business that enables us to interface with e-tailers who are specializing in e-commerce, and to provide seamless services across borders for people who want to sell their goods around the world. That acquisition has been renamed FedEx Cross Border, and that will be an important part as well of the whole solution set as we broaden our offer, particularly in the e-commerce business that is growing so quickly here in Europe and around the world.
You know, one other comment before the next question. Can you all hear me? Everywhere you go, at the TNT offices, here and everywhere that I've seen them, you obviously see the people focus, the cultural focus of the discretionary effort that the people put forward at TNT. It's exactly the same reason that FedEx is so successful around the world, is the same focus on people and the culture. We had Tex and his team to Memphis, and they commented, it's similar, very similar and a very nice fit. Without that, you would struggle to have a successful acquisition integration. We will not.
Morning. Mark Duursma, Dutch newspaper, NRC.
Hi.
David Binks just said that the integration starts today. Well, I can imagine that implementation starts today, but the thinking about integration has started already, I hope. Otherwise, you would be quite late with that. Can you tell something about consequences for TNT in the coming year or coming two years regarding the amount of employees, regarding the brand, disappearing from the street, those kind of things, practical things? Yeah.
Well, I think, I have to get very close to this microphone. I think, first of all, the important point to make is that, today, the customers will receive the same quality of service from both TNT and FedEx as they did yesterday, as I said in my opening remarks. We have been working on a roadmap for the integration. We've put a lot of very good work into that with collaboration from both sides, both TNT and FedEx. And now that FedEx has acquired TNT, we have the opportunity to really start to validate those plans and to transform from a roadmap more into an integration plan that we can execute, that has costs, that has timelines, and that has a method of how we will roll out the integration.
You asked about employees and about brand. I think it's really important to point out that this is an acquisition that assumes that we will grow the business and grow it in an expanding market. So we see that as creating more opportunities for employees. We've been very clear that we will work diligently to avoid any significant reductions, either here in the Netherlands or globally. As far as the brand is concerned, I think we've got two absolutely iconic brands that have great reputations. As such, we will make very good use of both of those brands. We will start to bring them together as part of that integration planning process, but we will make appropriate use of the excellent TNT brand for the foreseeable future as well.
Did you build the physical? You just talk about the roadmap and the cost which may occur with the integration process. Could you specify which cost would that be? And I was wondering as well, if you plan to sell assets from TNT in Europe, maybe the aircraft, if they have any left. And I was wondering, concerning the sale of assets, when the TNT Innight activities will be sold to SSVP and, for which amount of money? Thank you.
Thank you for the question. I'll start off and let David answer the rest of it. The obvious question is what happens to the TNT airline? Well, we had to by law sell the-- they had to sell the airline. They sold it to a company called ASL, based in Dublin, Ireland. Hugh Flynn is the president and the CEO. One of my ex-colleagues, David Slipper, actually works there now, so that's actually very nice. But so that went in its entirety there with the exception of a few 747s that we take. As you can see by the announcement where our headquarters will be moving to here, that should tell you quite a lot about how we see TNT and in Europe.
We are keeping Liège, and that's a very critical hub for us. We're keeping Cologne as well. We are keeping CDG as well. And you might say: Well, that sounds like too many hubs. The truth of the matter is, we have that many hubs all around the world. We have a hub in Memphis, for example, we have a hub in Indianapolis, we have a hub in Newark, we have a hub in Oakland, and we have a hub in AFW, and we have a hub in Greensboro. So, we see it as utilizing more regional connectivity, better service. Eventually, it's better for the customer, which means they give us more business, and ultimately, it's more profitable for us.
So I think going forward, you're going to see quite a lot of what David Binks said, a lot of growth and a lot of opportunities for both FedEx Express Europe employees and management, and for TNT's.
Let me come back to your question on cost. As I described earlier, we've built out a roadmap. You'll understand that until an acquisition is complete, that there is only so much commercially sensitive information that the two companies were able to share. And so it's a little bit early for us to put a cost around that. That is what I meant by we will sit down and start to do the detailed integration planning, as from today, and start to validate and start to roll out an implementation timetable and put some costs behind that. When we have done that, and it's appropriate, we will share more information with you. On the-
By the way, on that issue, one of the big issues, of course, is, and we will separate it every quarter going forward, the integration costs. We'll announce it on our earnings quarterly earnings calls. Obviously, the technology integration costs will be front and center as a prime example of one of the things that you'll start seeing on a quarterly basis.
And then just to address the final piece of your question. You asked about TNT Innight, which was, I think, the management board and execs identified that there were other core activities that TNT thought were more important to focus their resources on. And so the decision was taken to proceed forward with the sale of TNT Innight. In terms of the actual closing date, I must apologize, but I'll ask somebody to give you the detail of that closing date, because I just don't have it perfectly to hand.
Unless Martin has it.
I can share it, sure
So yes, we have announced the divestment of Innight. And during the coming six months, we will close that deal. That will go in two phases. A phase which is focused on Germany and separate phase on the Benelux business. Again, will be done in the coming six months, and as we announced at the time, no financial details are further disclosed.
Okay. Thank you.
Yeah.
Ellen Proper, Dow Jones, ABM. A lot of the remarks are focused on growth, so could you quantify those growth figures in terms of revenue and profit? Especially as TNT didn't return to sustainable profitability yet. And besides that, the growth will be in a market that is growing, so when would you be taking on the leading position in Europe?
... Well, I think the obvious answer is we don't have a projection of the profitability yet, but what we can tell you is that the e-commerce market is booming all around the world. I think there's a huge opportunity to grow the e-commerce market. There's big, big e-commerce players that we do business with today in the United States and not necessarily here, that have been telling us that we would like to see more of a lower cost delivery network, if you will, for their e-commerce positioning in Europe. So I think that you're gonna see very high growth, especially in the e-commerce market, going forward. We would not obviously have a projection to give you today for the amount of revenue and then the profitability, but we're working on this.
Thank you.
We got a question from the webinar.
Yes. So how will the acquisition affect existing operations in other regions of the world, like the Middle East?
Well, I, I can tell you that it affects a lot of the world. I'll be heading to China here, in the near future. Of course, there's some business opportunities to, grow together there. Brazil, obviously, another big, opportunity. We acquired a, a nice company, Rapidão Cometa, in Brazil not too long ago, and, ironically, and in a very good way, the company that TNT has in Brazil and the company that we have in Brazil are at opposite, opposite ends of Brazil, so they complement each other, extremely nicely. And that would be the case around the world. We have businesses around the world that we call GSPs, Global Service Partners, where TNT would have business or Global Service Partners.
So we're gonna look at how we can combine the businesses and in every way, combine them for better service, better opportunities to grow the revenue, and better profitability.
And I think just to add to that, you know, we talk an awful lot about the strength of TNT here in Europe, and obviously, this is the strongest region. But TNT has great strengths in other parts of the world, particularly in Asia Pacific, in South America, as Dave just mentioned, but also in the Middle East. And we talk a lot about the European trucking network, which I think Tex has referred to the jewel in the crown of TNT. We should not forget about the excellent trucking network that TNT have established in the Middle East and also in Southeast Asia as well, which will be notable additions to our network and will give us, again, more opportunity to get more customers to more of a network solution of both express and ground-based services.
So the integration, while the majority of the work, I think, will be European, there's also a significant integration activity and program that will need to take place in other parts of the world, and we see this very much as a global effort, not just a European initiative.
We've got time for perhaps one, two more questions. Got one at the back.
Two, actually, if I may. You talk about the, the European market on the, or concerning strong, snel delivery, the fast delivery. You said this one was $53 billion.
Sorry. The European express market is 53-
Yeah.
EUR 53 billion, $60 billion.
Oh, okay. You said that this market will grow approximately 15% per year. How do you gonna get that growth yourself? You talk about e-commerce, but I suppose it will not be 15%. So how will you get that growth somewhere else?
Just to reaffirm the numbers, just so we get these absolutely spot on. What I said is that the European express market is worth $60 billion, or EUR 53 billion, and that the e-commerce market in Europe, the total e-commerce market in Europe, is growing at 15% per annum, and that would mean that it will be worth over EUR 600 billion in 2017. So if I confused or misstated at all, then just to get them, get them spot on.
Which part of the piece of the cake are you gonna take then?
Well, we would, we would like to, we would obviously, I guess it goes without saying, almost, we'd, we'd like to participate in both of those pieces, in all of those pieces, and whether it's in euros or dollars, to be honest. We think the European express market has, you know, is growing. Some of that is stimulated, obviously, by the growth of the e-commerce market, which I think we've covered in terms of wanting to participate much more actively in that business. But we also see the business-to-business market, which has traditionally been a strength for FedEx and a strength for TNT, as an opportunity for further growth because of the stronger together proposition that FedEx and TNT will offer. So all of those segments.
I think we have time for one more question, and it's this gentleman right here.
Thank you very much. John Versleijen, newspaper Nieuwsblad Transport. Actually, I have three questions, but they can be answered maybe shortly.
That's it. No more questions.
First of all, you mentioned the hubs in the U.S.
Yeah.
Well, Memphis is the biggest.
Right.
Which one will be the biggest in Europe?
Charles, Charles de Gaulle.
That will be your main-
Will be the main hub. It still will be. I mean, it's the global connectivity for all of our international, global flights. That's the plan. That still will be the case.
... How do you interface that then with Liège operation?
Liège is the European regional hub that they've had in place.
I was just gonna say, and to be honest, you know, at the moment, what we're very clear about is that we have three... Well, we have three primary hubs in Europe. We have Cologne, we have Paris, and we have Liege. That's not to say that we don't have other important facilities. We just opened a new facility in Copenhagen-
Stansted.
in Milan, in Stansted. And so really, part of the integration planning will to be now to sit down and determine exactly how we use those different hubs and how we connect those different hubs to really optimize not just the efficiency of the network, but also that will give us the capability to improve services because of having multiple hub capabilities around the continent. But in terms of exactly how we will use them, it's a little bit early, again, for us until we can sit down and do some really detailed network planning.
So there will be also in Liège, intercontinental flights then to interface?
I-
Or that's too early to-
It really is a little bit early to get to understand. We have 657 aircraft around the world, and so making one decision really requires that we understand how we fit all of that together into a fairly complex network. And so that planning process really needs some detailed time and attention to it, and that, as I said earlier, will kick off today.
Yes, thank you. Another question is, you mentioned a lot about e-commerce and the expansion, the growth figures, 15%, amazing, actually. Also a big player in the e-commerce, Amazon, is planning to go into logistics, doing their own business. How do you see that trend?
Well, they're a, they're a big customer of ours, very valuable customer of ours. We meet with them, all the time, and we continue to hear from them that, they need our services, and we're happy that that's the case. I mean, when you think about it, quite frankly, the Walmarts of this world, for example, it also has e-commerce, and they also have their own trucking networks and logistics, and they're also a big customer of ours. And you can see that around the world, the same way in Asia as the US. So, we're very focused on providing excellent service. We have a great relationship with Amazon. We will continue to have a great relationship with them like we do Walmart and other big e-commerce players. But you should focus on the fact what I just said, 'cause people miss that.
Walmarts of this world have their own logistics, and they have businesses that they need our bit, our services, too.
Thank you. And the last question, very shortly. You expanded with TNT. Are you also looking more into acquisitions, forwarding, to make the whole network global?
We're probably gonna focus on TNT today. Thank you for your questions, and thank you all for attending this morning. I'm sure you will have some other questions, and we'll be up in the front here to answer them. Thank you very much.
Dennis?
Yes. The David and David will be up here in the front just in, if anyone has any further individual questions they want to put to them, just for the next 5-10 minutes. Thank you very much, everyone.
Thank you all.