YRC is not a takeover target...for many reasons

Implications: Shares of YRC Worldwide Inc. jumped today on speculation that Deutsche Post AG has offered $41 a share for the Overland Park transportation giant. YRC Worldwide shares rose as much as 8.7 percent to $30.20 before closing at $29.81. In heavy trading, YRC shares closed with a gain of $2.02, or 7.27 percent. Deutsche Post shares fell 31 euro cents to 20.25 euros in Frankfort. A spokeswoman for Deutsche Post, the parent company of shipping company DHL, declined to comment.  

Analysis: Talk of an acquisition of YRCW by Deutsche Post initially reported by theflyonthewall.com and briefing.com, then picked up by Reuters and later The WSJ, led to a 7% pop in YRCW’s stock price yesterday. Also after several news agencies picked up on that posted speculation, a false memo (see below) that was a joke noting the acquisition with details related to it was circulated around DHL internally yesterday. Deutsche Post management has confirmed that internal memo was false and likely a joke by amused employees. More importantly, fundamentally the sale of YRCW seems very unlikely at a price even near current valuation, none-the-less a 40% premium. YRCW is about to begin negotiations with the Teamsters to renew its current five year contract which expires March 31, 2008. My sense is that any sale by YRCW prior to securing that deal would require the Teamsters to be on board with the sale and to get something from it. I have trouble believing the Teamsters would easily agree to a buyout of YRCW by a German based company, without major concessions. Strategically this makes little sense for Deutsche Post/DHL which is struggling to turn around DHL in the US. Fundamentally, I can’t imagine a buyer for YRCW would emerge at a premium, in the midst of a Teamster negotiation, which likely won’t be ratified before March 08, with YRCW’s estimated $3B-$4B contingent withdrawal liability for underfunded Teamster pension plans, and with its earnings in a free-fall in the current treacherous LTL market. This however will continue to propel their stock price.here's the fake email being circulated around the internet:

Deutsche Post said today that it will acquire LTL carrier YRC Worldwide for approximately $2.4 Billion. Deutsche Post said it would also assume an expected $1.3 Billion in net YRC Worldwide debt, bringing the enterprise value of the acquisition to approximately $3.4 billion.

Bill Zollars, currently chairman, president & CEO of YRC Worldwide, will resign effective January 1, 2008, although Zollar's agreed to remain with the company afterwards in a consulting capacity. Freight veteran Jim Staley is also expected to announce his resignation. Mike Smid, currently CEO of YRC National Transportation will takeover the responsibilities of Zollars' and report to John Mullens, CEO of DHL, Deutsche Post's North American subsidiary.

"We're very pleased to welcome YRC Worldwide to the DHL family. We have focused on building scale in the North American market with our express and small package offerings. Our customers were telling us that they also wanted to be able to use that same reliable service for their heavy freight needs. YRC completes the circle for us," said Mullens. "We also expect sizable synergy's from combining the largest North American freight network with our international freight and logistics businesses."

Mullens declined to say exactly how much in synergy's he expected.

In 2006 Deutsche Post reported $79.5 billion in revenue, while YRC Worldwide reported $9.9 billion.

The $42.00 per share that Deutsche Post is paying represents a nearly 45% premium to YRC Worldwide's 60 day moving average. The all cash deal is expected to close in the fourth quarter.




Henri D. Duhot CTL
Senior Director MNC/Business Development
EMS-CM,ODM,Distributors, Semi-Con

DHL Global Forwarding
14309 E. 35th Place Suite 105
Aurora, CO 80015

Cell: 303-522-2819
Tel: 303-574-8746
FAX: 303-375-7856