Deutsche Post Buys AEI to Boost Global Business, Strengthen Public Bid

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BONN - Deutsche Post's $1.14 billion acquisition of Air Express International is part of a global strategy to make the Germans top postal dog in Europe and to ready the company's public offering next year.

"We are convinced that in the current postal climate only a few major players will survive and that therefore our ability to compete on a global basis is decisive,"said Deutsche Post spokesman Uwe Bensien.

He acknowledged that the Germans have spent upwards of $6 billion, begining with the $400 million purchase of Virginia-based Global Mail in October of 1998 to become a major player in Europe and the US.

He argued that the German Post had financed these massive outlays through real estate sales and not as some, including UPS, have charged, through cross-subsidizing the loss-making parcel business.

UPS has challenged Deutsche Post's activities since 1994 when it first went to the EU charging the Germans with illegal infusion of cash. Last summer the European Commission decided to investigate the charges once more and the case could end up before the European court of justice.

But Bensien said Deutsche Post was confident of winning the case. For one thing, he argued, the German parcel business is not running a deficit.

For another, he said, the Germans realized great sums from selling choice inner city real estate they no longer needed. "This is a unique achievement of the German Post. We built 34 brand new parcel centers in the countryside, well away from city cores which freed up a lot real estate."

The US acquisition, Bensien added, was an excellent fit with Swiss-based Danzas, the international logistics company the Germans bought for $1 billion late last year.

"We think the two companies complement each other. They don't share markets or clients, oh maybe one or two, but basically AEI is strong where Danzas has not been so strong."

But he noted that all AEI activities will be integrated into the Danzas Group's international business. Some management shifts are also involved with Renato Chiavi, who headed Danza's intercontinental business, becoming CEO of the combined companies.

The Germans expect to achieve major synergies - if nothing else by strengthening Danzas' position on the US market, and in the trans-Atlantic and trans-Pacific business.

For Klaus Zumwinkel, CEO of Deutsche Post, the takeover gives his company "an ideal position on the US market. The acquisition is another milestone in our strategy to become the leading international logistics enterprise."

He predicted that Deutsche Post would boost sales to $29.3 billion in 2000 and thus "occupy the No. 1 position in Europe in the fields of letter mail, parcel and express services and logistics."

The acquisition is a painful blow to Britain's Royal Mail, which staked out ground in global delivery services years before the Germans, and now can't keep up with their rival's spending.

In October the British had concluded a strategic alliance with AEI that they hoped, in the words of Royal Mail's US CEO David Walker, would transform "our distribution capability at a stroke and propel us forward in our drive to be the No. 1 alternative to USPS for international bulk mail."

That alliance is now out the window and has left Royal Mail looking for someone else with the kind of heft they had hoped AEI would supply.

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