FedEx (NYSE:FDX) said on Monday that it will cut up to 6,300 jobs in Europe as the final step of integrating acquisition target TNT Express into the transport giant's global delivery network.
The company bought TNT Express in 2016 for $4.4 billion, beating out rival United Parcel Service (NYSE:UPS) for its European operations. The deal has failed to live up to expectations, with FedEx twice replacing the executive leading the integration efforts and the company taking multiple charges due to weak European sales.
In a statement, FedEx said it is nearing the completion of the integration, and must "address the duplication resulting from operating two large European networks connecting similar geographies." It will downsize an air hub in Belgium and focus its resources on its Paris hub, similar to the way it has built its U.S. operations around its Memphis, Tennessee, hub.
That includes reducing employment by between 5,500 and 6,300 people. The company said it expects $300 million to $575 million in severance payments through 2023, but added the job cuts will save between $275 million and $350 million annually beginning in 2024.
TNT was an underperforming company when it originally agreed to be bought by UPS in 2012, and was further weakened when that deal was blocked by European competition regulators a year later. FedEx swooped in three years later, but has been plagued by weakness in Europe coupled with a high-profile cyberattack against TNT in 2017 that disrupted operations.
FedEx had originally estimated total integration expenses of between $700 million and $800 million, but has spent double that.
Karen Reddington, president of FedEx Express Europe, said she is optimistic the changes will help to make the deal a long-term success: "We acquired the TNT business in 2016 for one reason: to open up the world for our customers by connecting the global FedEx air network with TNT's extensive European road network to become a top-tier player in Europe. This process, while difficult, will allow us together with the completion of the network integration to operate as one company offering greater coverage, speed of delivery, extended operational capabilities, and enhanced service levels."