German Post Looks for $200 Million in U.S. Market

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NEW YORK - Deutsche Post Global Mail, the new name for the German Post Office's U.S. operations, aims to become a $150 million to $200 million operation in the near future, Rainer Hengst, the U.S. general manager said.

Speaking at last month's DM Days conference here, Hengst said current business was "well past $100 million" a year, with growth both organic and through continued acquisition.

The rebranded parent company, Deutsche Post Worldnet, now owns four mail delivery companies in the United States: Global Mail in Sterling, VA; Yellowstone, Chicago; the international division of Quickmail, New York; and Sky Mail in Salt Lake City.

"The businesses we had six months ago -- Global Mail and Yellowstone -- continue to grow and show a strong bottom line, which is why we acquired them when we did."

Quick and Sky were bought earlier this year, and both fill gaps in the U.S. network. "Quick is primarily in international corporate mail and it gives us an additional customer base and is a great fit geographically.

"Our focus in buying them was to fit in some blanks on the map, and they have some excellent pros in the right locations -- Chicago, Boston, Detroit and a bit on the West Coast. Sky is a regional company in an area where we might have had customers but not a presence.

"We're going to continue growing our own business, and if the right acquisition comes along, we'll grow that way. And yes, we are thinking of more acquisitions in the U.S. There are still some good targets out there."

Short-term, however, Hengst is focusing on integrating the various companies that make up the rebranded Deutsche Post Global Mail. For Global Mail the fit is natural. Quick was integrated immediately. Sky is still open. Yellowstone will become part of the new brand later this year.

"By the time we rebrand it, the company will have been in the market as a Deutsche Post subsidiary for 18 months, and people know it is part of our operation. So the timing is right to bring them under our umbrella."

The umbrella will include new operating facilities on the back end, a new invoicing system and discussions about new businesses that need to be created, Hengst said.

He is getting new American clients outside the acquisitions and claims that the "consistent thread" he hears is that "we take good care of them." One result has been more inquiries about shipping globally.

"Clients tell us, 'You do a lot with Germany, but can you help with France or some other country?' And of course, we can. Through Global Mail, our first destination is Canada. We have a huge business there. And Quick has brought a facility in Canada into our mix.

"Our top- and bottom-line numbers are strong, among the strongest of any company that Deutsche Post Worldnet has in the world," he said. Nor is the company limited to Europe and the United States. It is moving forcefully into Asia.

Deutsche Post Worldnet's annual report released in Bonn last month reflects this growing exuberance. Sales in 1999 jumped 50 percent over 1998 to 22.4 billion euros, or about $21 billion, from 14.7 billion euros.

After-tax profits were 1.12 billion euros, or about $1 billion, up 20 percent over 930 million euros in 1998. But the most spectacular increase was in the contribution made by sales in 140 countries worldwide.

In 1998, they accounted for 2 percent of the total. Last year, they had streaked to 22 percent, clearly a function of the company's multibillion dollar buying spree over the last two years.

The bulk of the profits, almost $1 billion, came from the post office's monopoly on letter mail that is due to expire in 2007; although, bulk mail is to be liberalized in 2003 and thrown open to private competition.

The monopoly could be the one hurdle the enterprise faces as it readies an initial public offering this November. UPS has charged the Germans with cross-subsidizing their parcel delivery service with monopoly money.

The European Union has been considering the matter, and if it rules against Deutsche Post, the company may be forced to pay several billion euros in fines which, media accounts claim, could derail the IPO.

Deutsche Post, however, is confident of winning in Brussels and has appointed Deutsche Bank and Warburg Dillon Read to handle the IPO.

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