Good day, everyone, and welcome to the FedEx Corporation investor call. Today's call is being recorded. At this time, I will turn the call over to Mickey Foster, Vice President of Investor Relations for FedEx Corporation. Please go ahead.
Good day, and thank you for joining the call to discuss our announcement that FedEx Corporation has entered into a definitive agreement to acquire TNT Express. This call is being broadcast from our website, and the replay and podcast will be available for about one year. Joining us on the call today are members of the media. During our question-and-answer session, callers will be limited to one question in order to allow us to accommodate all those who would like to participate. If you're listening to the call through our live webcast, you're welcome to submit your question via email or as a message on StockTwits.com. For email, please include your full name and contact information with your question and send it to our ir@fedex.com address. To send a question via StockTwits.com, please be sure to include dollar sign FedEx, FDX, in the message.
Preference will be given to inquiries of a long-term strategic nature. I want to remind all listeners that FedEx Corporation desires to take advantage of the safe harbor provisions of the Private Securities Litigation Reform Act. Certain statements in this conference call 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 we disclose any non-GAAP financial measures on this call, please refer to the investor relations portion of our website at fedex.com for a reconciliation of such measures to the most directly comparable GAAP measures.
Joining us on the call today are Fred Smith, Chairman, Alan Graf, Executive VP and CFO, Mike Glenn, President and CEO of FedEx Services, Christine Richards, Executive Vice President, General Counsel and Secretary, Rob Carter, Executive Vice President, FedEx Information Services and CIO, David Cunningham, Executive Vice President and COO of FedEx Express, and Cathy Ross, Senior Vice President and CFO of FedEx Express. Now I'll turn the call over to our Chairman, Fred Smith, for his thoughts on today's announcement. Fred?
Thank you, Mickey. Welcome to our conference call, everyone, to discuss our plans to acquire TNT, a leader among global express delivery companies with a very strong position in Europe. We believe this strategic acquisition will add significant value for FedEx share owners, team members, and customers around the globe. We're very proud of the intercontinental and intra-European networks we have built over many years. FedEx Express has a multi-billion-dollar European business, and it is growing daily. We have long recognized the need for a complementary pan-European ground network. This acquisition allows us to more quickly broaden our portfolio of services to take advantage of market trends, especially the continuing growth of e-commerce. TNT is an excellent strategic fit with FedEx. It will expand our global portfolio and dramatically lower our cost to serve European markets by increasing density in our pickup and delivery operations.
It enhances global connectivity, strengthening networks in Asia-Pacific, the Middle East, and other emerging markets, and offering a wider range of global transportation solutions for our customers. FedEx has a very strong track record of incorporating acquisitions into FedEx. We expect similar success with TNT as our cultures are very similar. We have the Purple Promise: I will make every FedEx experience outstanding. TNT is similarly focused on serving customers and delivering value for shareholders and supporting the communities where they live and work. In summary, we're excited about the strategic opportunity to bring FedEx and TNT together, and we look forward to delivering an even better customer experience in future years. I'll now ask Alan Graf to review some of the specifics related to the transaction. Alan?
Thank you, Fred. Thank you, Fred. Good morning and good afternoon to those of you listening around the world. I would like to give you some of the financial highlights of this strategic transaction before we open the floor for Q&A. FedEx will acquire TNT for EUR 8 per share for a deal totaling EUR 4.4 billion, a 43% premium over TNT's volume-weighted average share price over the last 30 days. The transaction will be all cash through a combination of our existing cash and future debt financing. Due to the nature of this transaction, including related fees that we will incur and the time required to close the transaction, TNT will have a minimal impact on FedEx's earnings in FY16 and FY17. However, we expect TNT to be very accretive to our earnings thereafter.
FedEx will isolate and report all TNT P&L impacts each quarter so that the express profit improvement plan progress remains clear. The transaction is subject to customary conditions and regulatory clearances, including a competitive review in Europe and several other countries. The combination of FedEx and TNT is not expected to raise antitrust concerns, principally as a result of the relative strengths of competitors in the relevant markets in the EU and in other relevant jurisdictions. We expect the transaction to be completed in the first half of calendar 2016. PostNL N.V. has committed to tendering the 14.7% of outstanding TNT shares that they currently own. As Fred noted, TNT will be highly complementary to our global operations.
The company generates nearly all of its approximate EUR 6.7 billion annual revenue from outside of the U.S., from its major position in Europe and solid presence in Asia-Pacific, the Middle East, and other emerging markets. The company delivers more than 1 million shipments around the world every day, utilizing a network of over 1,000 hubs and depots. We believe that this acquisition is a smart, cost-effective way to significantly expand our global capabilities and improve our densities. Many of the markets where TNT has a strong presence, such as Europe, are locations where we currently have a relatively small share of regional and domestic deliveries. TNT and FedEx assets and infrastructure will be optimized, resulting in a more efficient network that exists for either company today.
For example, we expect increased efficiency in our hub and feeder operations, reduced pickup and delivery costs, particularly in Europe due to greater stop density and lower support function costs. We do expect revenue opportunities from a TNT and FedEx combination, as the combined entity will offer a more comprehensive portfolio of business solutions than either company is able to offer today. We also expect improved FedEx service, such as earlier delivery times and later pickup times in a number of key markets in Europe. The combination offers a unique opportunity to strengthen the resource base of both companies, thereby offering prospects for employees of the combined companies. The combined companies will cooperate to avoid any significant redundancies in the global or Dutch workforces.
The combined companies will foster a culture of excellence, where qualified employees will be offered attractive training and national and international career progression based on available opportunities. FedEx will develop a very comprehensive integration plan with TNT, and we will talk more about our plan and the related costs at a later date. We believe this is a fantastic transaction with the combination expected to drive incremental revenue, earnings, and cash flows for our company and long-term value to our shareholders. We are extremely excited about the benefits it will bring to all of our stakeholders. Mickey, for Q&A.
Thank you, Alan. We're now ready to take the first question. Please remember to limit your questions to those of a strategic nature specific to this transaction. We will defer on questions concerning this quarter's operations and FY16 outlook until our fourth quarter conference call in June. Okay, we're ready for the questions.
Thank you. If you would like to ask a question, please signal by pressing star one on your telephone keypad. If you are using a speakerphone, please make sure your mute function is turned off to allow your signal to reach our equipment. Again, press star one to ask a question. We'll pause for just a moment to allow everyone an opportunity to signal. We'll take our first question from Scott Group with Wolfe Research.
Hey, thanks. Good morning, guys. So, Alan, you made a comment that it shouldn't have an impact on fiscal 2017 earnings, but should have a lot of accretion longer term. So if the deal closes in the first half of calendar 2016, why won't we see accretion in fiscal 2017? And then that comment implies though separately that there'd be some pretty material synergies. Any rough thoughts on what the synergy number could be that you're targeting?
Scott, this is Alan. If you want to consider the acquisition before all the fees that we pay and the amortization of intangibles, it will immediately be accretive. However, we have to take into consideration those accounting charges. And also, we plan to be very aggressive in the first year on investing in integration with this business. So that's why we're saying what we're saying about 2017. But believe me, after that, I think you're going to like what you see.
We'll take our next question from Tom Wadewitz with UBS.
Yeah, good morning and congratulations on the deal. Let's see. So can you give us maybe a sense of where the synergy opportunities would be? I guess I think of the potential, I guess, operating leverage and pickup and delivery in Europe. That seems to make sense. And in terms of FedEx's air network, both in Europe and then intercontinental, to the extent that TNT has express revenue in planes, they can put it in FedEx planes. But can you just give us a sense of maybe rank order? What are a couple of the biggest synergy drivers? And I don't know if there's any way to kind of scale or talk about how long it takes to realize some of those. That would be helpful. Thank you.
Tom, undoubtedly, the biggest opportunity here is in Europe and the reduced pickup and delivery costs that FedEx will enjoy as a result of TNT's network. Over time, we will also benefit from the consolidation of the air operations, although we will sell the airline, of course, because we're not allowed to own a majority share of a European airline according to the laws that are in place. I think there are a lot of opportunities in terms of strategic sourcing. And as we've looked at our models and recognized that we only had a couple of days of non-public due diligence, I feel very comfortable that we are going to achieve cost benefits across the board. This is not a redundancy play. This is productivity and density and combining two powerful networks on a global basis.
Thank you. Our next question comes from Christian Wetherbee with Citi.
Great, thanks. Good morning. I was wondering from a CapEx or investment perspective if there's anything specific that you think needs more meaningful investment and if you think anything in the portfolio that TNT provides that maybe could be an opportunity for divestment? Just your thoughts around that investment. Thank you.
TNT has a very good strategy going forward. We understand exactly what they have planned and what they're going to do. We think we can enhance that significantly by combining it with our operations. And so I don't see this as requiring a significant amount of CapEx in relationship to what our normally already high CapEx is. Again, this is going to be driving significant cost benefits across a number of buckets, and that's where we'll see it. As far as divestments go, we, of course, have to get approval from a number of countries outside of the EU. And although we don't anticipate any requirement for that at this point, we will see how that plays out.
Thank you. Our next question comes from Helane Becker with Cowen and Company.
Thanks, Farhan. I'm the operator. Hi, guys. Thanks for the time. So, Alan, have you talked to the EU and gotten kind of conditional approval? Because you seem very confident that approvals will be granted, and I'm just wondering if that's why.
Helane, this is Christine Richards. We have not talked.
Hi, Chris.
Hey. We have not talked to the EU. It would have been premature at this very early stage to have done so, but plan to engage promptly in their process. We have a very clear understanding of the various applicable markets in Europe, our relative size, TNT's relative size, and the size of the existing large-facing competitors. Based on our understanding of that and the law, we are very confident that we will be able to obtain EU approval, but we will have to go through their process.
Thank you. Our next question comes from Robert Salmon with Deutsche Bank.
Hey, thanks. Good morning. Fred and Alan, I guess in your prepared remarks, you had talked a little bit about some revenue opportunities. Can you give us a sense of what adding the domestic pickup and delivery and the domestic service offering, what that will provide from an international perspective or even kind of intra-Europe where you think FedEx can take some more market share and any kind of preliminary thoughts related to the potential revenue synergies associated with this deal?
This is Mike Glenn. The combination of FedEx's existing network and TNT's broad ground-based network will offer tremendous opportunities for us as a result of enhanced coverage, a broader portfolio, obviously better pickup and delivery costs, and we're very excited about those opportunities.
Thank you. Our next question comes from Allison Landry with Credit Suisse.
Good morning and congratulations. TNT has a stated EBIT margin of about 6%-8% by 2018, 2019. So I was wondering if you could give us a sense of whether you think the combination could push that maybe to the low double-digit margin range, or is the competitive environment in Europe such that it will be difficult to expand margins beyond that?
Allison, I would say that we expect to do better than what TNT has in their plan as a result of the combination, of course. I'm not going to get into predicting what our margins are going to be in one sector of FedEx Corporation's business. But again, I would point to you that we expect FY18 it will be very accretive to where we have otherwise been.
Thank you. Our next question comes from Ken Hoexter with Merrill Lynch.
Great. Good morning. Sorry, coming to you from the middle of the ocean right now, but just wanted to find out you talk a lot about culture and making acquisitions. And this acquisition, obviously, you're acquiring a unionized company. Can you talk about, Alan, you talked about the speed with which you thought you could cut costs. Are there restrictions you think govern what you might be able to do given that? And can you talk about the culture meshing with a unionized entity into FedEx and what that brings to the company?
Well, first of all, as I said earlier, this isn't a redundancy play. I'm sure there will be some, but I expect it to not be significant at all. What's going to happen here is a result of putting this fantastic network into the FedEx portfolio. We will see all kinds of productivity enhancements, particularly the pickup and delivery densities. We intend to grow this business as we continue to grow our European business. So I'm talking about productivity improvement rather than redundancy savings. I'll turn it over to Fred for comment.
I have two email questions. One from Andre Mulder, Kepler Capital Markets. Why invest in a mature competitive market like Europe rather than in growing emerging markets? Well, let me remind you that we have substantial operations in emerging markets around the world. We've been in China 30 years. We have both an intercontinental and a domestic business in China uniquely. We have a very robust operation in India. We have operations in Africa. We made an acquisition there recently. We have operations in Poland where we made an excellent acquisition. We made an acquisition in Brazil. So we have been very active in emerging markets. But Europe, despite the fact that there has been low growth, is still an enormous market both for import, export, and within the European Union overall.
And we were present in a major way in two of the four segments of the transport areas that we focus on. One, the intercontinental. We're very big in that. And second, in the intra-European air express, but we were not big in the pan-European surface and had limited domestic operations, good ones in the UK and France and Opek, but small. So this is very complementary. And as Alan said, amplified by Mike Glenn, the real opportunity here is to produce the transportation between the two companies at a significantly lower cost and then to bundle new revenue opportunities with a broader portfolio. That's why the opportunity comes in those areas and not with huge redundancy. So it's a very positive thing, I think, for both workforces and for our customers. The second email question I have is Ben Hartford from Baird.
Does this transaction change how you think about your express capital expenditure plan, specifically the aircraft order book over the next five years? The answer to that is no. This does not have any significant effects on our aircraft requirements at all.
Ben, let me amplify that just a little bit. We're going to have a wonderful 2016. Our cash flows here are very strong. Our balance sheet is very strong even after we acquired TNT. I don't want to speak for the rating agencies, although we did meet with them yesterday, and I'm not expecting any downgrades, even though the size of this transaction is fairly large. Our cash flows are such that we can continue with the plans that we have to modernize the fleet at Express and continue to grow ground and freight while we integrate the TNT business. Again, it's going to be a while before we can actually start working to do that, but I can tell you the integration planning is already starting.
Thank you. Our next question comes from Art Hatfield with Raymond James.
Hey, morning and congrats on the deal. Hey, Alan, just real quick on the integration. You had mentioned that you'll be investing in 2017. What are the greatest hurdles or risks that you guys face in the integration process?
Well, our track record, Art, as you know, of integrating companies is very strong. If you take a look at Flying Tiger, if you take a look at Caliber, which is now FedEx Ground, American Freightways, I mean, we know how to do this. That's one of the great strategic strengths of this company. We have a great integration planning process, but obviously the biggest risks are two. One, it's going to take a while to get these approvals. Two, the execution risk. While the execution risk here is probably high relative to other deals that we've done, I don't think that there's any question that we're up to the task. We know what we need to do. We'll be investing a lot of our greatest talent in figuring out how to integrate this, not limited just to operations, but to IT, accounting, tax across the board.
We know what the task at hand is, and I believe we're up to it. I think that for the long-term benefit of our shareholders, this will be one of the big wins we've ever done.
Thank you. Our next question comes from David Ross with Stifel.
Yes, good morning, gentlemen. TNT has a much bigger presence in the B2B market than the B2C, but you talked about e-commerce as being a benefit in your opening remarks. Is there anything that you see FedEx adding to the TNT networks given your, I guess, experience in the B2C market in the US?
This is Mike Glenn again. There are a couple of opportunities here. One is enhancing our cross-border e-commerce capabilities. We're very excited about the growth opportunities going forward. And with online buying in 2014 representing over $1 trillion in sales and forecasted to double in the next four years, according to Forrester, we think there's a tremendous opportunity in cross-border e-commerce. At the same time, as I mentioned before, the productivity enhancements we will have through the combination of the pickup and delivery networks will allow us to be much more competitive going forward. And the acquisition of Bongo, which we announced in December, will certainly enhance our cross-border e-commerce capabilities in that regard. So we're bullish going forward in the opportunities, especially with the combination of the networks and the productivity that will result.
Thank you. Our next question comes from William Greene with Morgan Stanley.
Hi, good morning. Alan, can you just remind us a couple of things about the balance sheet in terms of how much debt you're willing to take on? Obviously, I think most of us would make an assumption this would kind of be something like 60/40 financed in favor of that, but maybe you can give us some sense of what you're comfortable doing depending on how the markets treat you on the interest expense side?
Thanks for the question, Bill. What we intend to do following the acquisition of TNT and after we issue the amount of debt that we need to, keeping in mind that we're going to keep building our cash balances up to the point of closing. So that should reduce the amount of debt that we will actually need to issue. We want to get our credit metrics back to where they are today, which will take about 24 months, I think, and then we'll go from there. Having said that, it'll still be a very strong balance sheet, and there could be other opportunities that come our way.
Thank you. Our next question comes from Bascom Majors with Susquehanna.
Yeah, thanks. Alan, to expand on your previous comments there on the balance sheet, I was curious, you've talked before about growing the common dividend significantly and increasing the yield over time. Does this change or delay the pace of kind of how long you expect to do that?
No, sir. We want to continue to keep growing our dividend. We'll keep buying back stock to prevent dilution from our compensation programs. And we'll keep investing in the businesses, as I said before. So we think we can do everything that we had planned to do and talked about as well as acquire TNT.
Thank you. Our next question comes from Sam Savage with Argentière Capital.
Hi, my question's been answered. Thank you.
Thank you. Our next question comes from Nate Brochmann with William Blair & Company.
Good morning, everyone. Let me echo my congratulations. Just real quick, I mean, obviously, in the past, you've been very comfortable kind of building out Europe on your own and making it kind of one integrated, organic kind of approach with some tuck-in acquisitions here and there. Obviously, this was an attractive asset for you in making a bigger splash. Why was kind of now the right timing to kind of go in a different direction? And why did this opportunity look a lot more attractive now than, say, a year ago? And I'm sure, obviously, the relative dollar strength has helped a little bit, but I just wonder if you could expand on that?
Well, this is Fred Smith speaking. Obviously, as you just noted, the exchange rate was favorable. Second, the European economy appears to be growing a bit, fueled, no pun intended, by the lower price of oil and the quantitative easing that's been announced by the ECB. I think also you have to give a lot of credit to Antony Burgmans, the chairman, and Tex Gunning, the CEO, and the management team that they assemble. They've got some terrific executives there that we have come to know in the last little while. And we were impressed with the steps that they were taking to improve TNT and their outlook strategy. We think that they did a lot of the things that TNT needed to have done. And the planets sort of lined up, and we were able to do a transaction with them.
But I think all of those things played a part in this transaction.
Thank you. Our next question comes from Andrew Hall with Stephens.
Yeah, good morning, guys. This is Andrew on for Jack Atkins. Quick question from us. So the EUR 250 million or EUR 250 million that TNT had identified as cost cuts, will those be additive to any additional synergies you guys expect from the deal?
Well, not to get into a lot of great detail at this point, but as I said, I think we can, with the combined networks, do better. I think that their goals were strong. And as Fred said, we believe that they were achievable. Obviously, we did a lot of due diligence on that. But I think once we combine the entities, we will do better than that. And those are in my, albeit a little bit opaque, FY18 EPS accretion forecast. I will say again, it's going to be very accretive.
Thank you. Our next question comes from Brandon Oglenski with Barclays.
Well, good morning, everyone. And I guess it pays to be patient here. Along those lines, I think a lot of U.S. investors haven't looked at TNT in a while since, obviously, one of your peers failed on a bid here. But back then, it was talking about the product overlap and the anti-competitive concerns that the EU brought up. And I think we're limiting the discussion really only to the express or the time-definite market. But can you talk more broadly about where TNT is strong in their product portfolio, where they have the market share, and how that does or doesn't overlap with what FedEx is doing in Europe today?
Well, we've already talked about their extensive ground network, which really focuses a lot on more of the B2B sector. We think we can take advantage of that opportunity, as we noted earlier, with a combination of our respective networks to have more productivity in the pickup and delivery operation. They tend to focus a bit more on the heavier freight sector as well. We think that's also very complementary. We're very excited about the future revenue synergies from the combined networks and being able to feed into our intercontinental network as well. So we think, as I said, there are plenty of opportunities going forward, not to mention the e-commerce opportunities that I mentioned earlier.
As a reminder, that is star one to ask a question. Our next question comes from Jeffrey Kauffman with Buckingham Research. Mr. Kauffman, your line is open.
Oh, sorry about that. I was on mute. Hey, guys, congratulations. A lot of my questions have been answered. Let me throw out this one. When somebody else was going through this about two years ago, I think one of the things that some of the individual countries were focused on was what makes Europe different is each of these countries has kind of their local domestic parcel champion. And there seemed to be a focus on maintaining competitive balance and maybe even creating a new competitor in some of these markets. Given that yours is more of an end-to-end, as you mentioned, as opposed to kind of someone who already had a big presence adding TNT, what risk do you see that maybe not on an EU basis, but some of the individual countries within Europe may try to extract their pounds of flesh in this process?
This is Christine Richards. We have very high confidence that when you look at the relevant markets in Europe, even those that are local country domestic markets, that the market positioning that we provide will make this merger very attractive to the regulators as enhancing competition and improving options for customers as they're able to tie in through an additional one source, their ability to get local services, international services, and intercontinental services without having to break business between two entities. So we found throughout our history, you look at what we've done with Ground in the U.S., the customers like to be able to deal with one entity for their full broad range of service needs. We expect that to be very compelling to the regulators in Europe.
Thank you. Our next question comes from David Vernon with Bernstein.
Hi, good morning, Alan. Thanks for taking the question. Just as a question for you on, are there any parts of the TNT Express business that you guys don't like? Obviously, it's a mix of time-definite, day-definite, and a lot of domestics in there. It's a different operating model than the express business, which is all time-definite. Is there any part of the business that you would see maybe wouldn't fit independent of any type of regulatory request to divest anything?
David, this is Alan. We like it all. I mean, as Fred mentioned about how the timing came together and everything, we've been following this company for a very long time. And we know exactly what their capabilities are around the globe. And we think it is a wonderful fit everywhere.
Thank you. Our next question comes from Keith Schoonmaker with Morningstar.
Yeah, thanks. In the past, we thought online fulfillment in Europe was maybe four or so years behind patterns in the U.S. Having looked so closely at this now, does this seem accurate? And more importantly, does the cross-border shipment nature of TNT's B2C make this a little less dilutive than some of the low-priced U.S. B2C shipments that we've seen in the market in the last couple of years here?
I'm not sure I understand the second part of the question, but let me address the first part. Cross-border e-commerce is growing rapidly. As a matter of fact, the lane segment between the U.S. and Europe is probably the fastest growing segment there. Again, that plays into our border, excuse me, Bongo acquisition that we announced previously. And of course, again, the complementary nature of this acquisition will help us in terms of coverage and efficiencies and productivity in the pickup and delivery operation. So, as I said, we're excited about those opportunities and the combination of the Bongo acquisition and obviously the significant productivity opportunity that we see here in the pickup and delivery operation.
This is Alan. I got a question from Helane about if the deal is successful, can you shift your home market to the Netherlands to lower your overall tax rate? No, we cannot. We're a certificated U.S. air carrier, and we'll be paying U.S. taxes. We have no interest at this point in anything like that.
Thank you. Our next question comes from Scott Schneeberger with Oppenheimer.
Thanks. Good morning. Congratulations. Just curious, anything unique with regard to e-commerce that TNT would add to the portfolio? And as a follow-up, post a successful close, how do you anticipate the branding process to occur? Will it remain TNT, or will you migrate over time? Thanks.
Well, I think we've covered the e-commerce question pretty well. Obviously, TNT has a significant road network, which we believe is going to be very complementary to the FedEx network. I won't spend any more time on that. Historically, FedEx, when we make a major acquisition, we take our time in addressing the branding issues. We certainly respect and value the TNT brand, and we will have an appropriate plan as part of the integration plan.
This is Alan. We value the TNT brand very highly. You may notice if you go into the FedEx Office, we still have the Kinko's brand in there. I agree with what Mike said. We'll take our time and look at it, but there is significant value to the TNT brand.
There may be certain parts of the world where we want to retain the TNT brand because it's so strong.
This is Christine Richards. I have a follow-on question from Helane Becker. The question is, can you say if you expect a competitive offer? No, we do not. But the merger protocol, as is Dutch practice, contains a number of provisions that address what would happen should someone want to make such an offer and puts restrictions on how that process could be handled. We feel we have a very compelling case to acquire this business and are very confident that we'll be able to close it and provide the level of deal certainty that is so important both to TNT and to FedEx.
Thank you. Our next question comes from Sachin Shah with Albert Fried.
Hi, good morning. Congratulations on the deal. Just to kind of circle back on the synergy amount, are you putting out specific numbers on that yet? And then also, can you just maybe confirm, does the deal require MOFCOM, Chinese approval? And aside from the E.U. and the U.S., are there any other specific regulatory approvals aside from that, like Chinese MOFCOM?
This is Alan. I'll start with the first, and I'll pass it to Chris for the second. The only thing I'm going to tell you today is that we don't expect it to have any impact until FY18 when we'll be very accretive. Chris can talk about China.
The offer is conditional on obtaining clearance in the EU, China, Brazil, and the US. However, given TNT's relatively small presence in the US, it is probably not going to be required that we file there. We're going to have to take a look at that. Just to give you some sense of this, we expect that we'll file in a total of about 17 or 18 jurisdictions to go through the appropriate processes in those countries.
Thank you. Our next question comes from Scott Group with Wolfe Research.
Hey, thanks for the follow-up. So two things, actually. One, TNT has been struggling and losing share for some time. Is there anything you could do during this interim period to help slow that? And how quickly do you think you can reverse those share losses? And then just separately, Alan, you've been pretty clear about the fiscal 2018 timeframe for accretion. Given just the time and focus this is going to take, is there risk to fiscal 2016 from an express profit improvement standpoint where this is just going to be time and distraction?
Well, I'll take the second part. We don't think there's going to be risk to Express in terms of a distraction whatsoever. We will have all hands on deck in integration planning, and we will do everything we can possibly do in integration planning that's legal while we don't have actual ownership of the company and intend to be very aggressive in that regard. But we cannot manage the business during that period of time. So that is part of the risk that we are taking on here. And that was a very good question. We are on track for our profit improvement plan. I look forward to talking to you in June about our results for 2015 and our outlook for 2016. We'll be very specific about that.
As I mentioned earlier, we will isolate for you what costs we incur for TNT so that you'll see those separately from our profit improvement plan. Chris. Let me address some of the question, the other part of the question rather about the market share loss. There are really three things that were creating the issues for TNT. One, they made a deliberate decision to divest some non-compensatory traffic. And they right-sized, for instance, their Italian network. So some of that was purposeful on their part. The second is they were under an enormous competitive attack by large competitors because their portfolio of services, the so-called bundle, was not as broad and as competitive as these other larger competitors. Well, of course, this transaction solves that issue for them and at the same time broadens the FedEx portfolio.
So we believe in that regard that just the transaction alone gives an awful lot of credibility to the respective sales efforts of both FedEx Europe and TNT. And then lastly, I mentioned the admiration we had for the work that had been done by the new management team on improving things inside TNT. And at the top of the list in that regard was the significant improvements in service levels that we saw. And it was really extraordinary how successful they had been over the last year or so in getting TNT's service levels for this sort of unduplicated surface transportation network back up to very, very high levels. So I think all three of those things will hopefully mitigate any market share loss trends. And certainly, once we can integrate the two entities, it would be our hope that we can increase our market share there.
Thank you. Our next question comes from Rob Salmon with Deutsche Bank.
Yeah, thanks for the follow-up. Alan, in kind of your prepared remarks, you had commented about the minimal accretion expected in 2016 and 2017. Could you give us a sense in terms of framing up the amortization of purchasing and accounting and the cost of integration as we're thinking about those couple of years?
I'll have more to say about that in June. We've got a lot of work to do on purchase accounting and valuation of how much goodwill and actual and intangibles there are as part of the integration planning process. But our current estimates are that the real reason we're not going to show you a lot of accretion in 2017 is our heavy investing in the integration once we get a hold of the company. We want to be aggressive. We want to be very positive about how we approach this. And we plan to do the right thing for the long-term benefit of our shareholders, which is to get this thing integrated and in good shape as fast as possible. And so that will require more upfront costs than would normally be the case.
But having said that, I think the integration is going to take three or four years. But after the first year, the benefits and the synergies of this acquisition will far outweigh the continued integration costs. And we will, again, be very accretive in 2018.
Thank you. That does conclude our question and answer session. I will now turn the meeting back to Mickey Foster for closing remarks.
Thank you very much for your participation on our TNT announcement conference call. Feel free to call anyone on the investor relations team if you have any additional questions. Thank you very much. Good day.
Thank you. That does conclude today's investor call. We thank you for your participation.