FedEx Corp is to buy Dutch package delivery firm TNT Express for an agreed 4.4 billion euros ($4.8 billion), stepping up the challenge to rivals United Parcel Service and Deutsche Post in Europe.

European regulators blocked a 2013 takeover of TNT by UPS due to concerns it would stifle competition, but analysts and executives said on Tuesday FedEx, with its strong air fleet, would complement TNT’s sizeable European road network.

“Europe, despite the fact that there has been low growth, is still an enormous market both for import and export,” FedEx Corp. Chief Executive Fred Smith told analysts.

TNT gives FedEx access to pan-European service and the domestic UK and French markets, areas where it is not yet a big player, Smith said, while TNT customers will get access to FedEx’s global distribution platform.

ING analysts estimate Deutsche Post’s DHL currently has a 19 percent market share in Europe, followed by UPS with 16 percent, TNT with 12 percent and FedEx at 5 percent—meaning the deal could catapult FedEx to second place.

FedEx will offer 8 euros in cash per ordinary TNT share—a 33 percent premium on last week’s close, though below UPS’s 2013 offer of 9.5 euros.

Memphis, Tennessee-based FedEx is financing the deal with debt, the latest company to take advantage of low interest rates.

TNT shares were up nearly 30 percent on Tuesday, close to FedEx’s bid price, while FedEx stock rose 3.6 percent.

“FedEx has laid on the table an attractive offer price,” said ABN Amro analyst Maarten Bakker, who has a “hold” rating on TNT shares.

“With FedEx having always been the most logical predator of TNT Express, we see the chances of a competing offer as slim.”

FedEx finance chief Alan Graf said the company would “be very aggressive on spending on integration in the first year,” and the deal would create unspecified cost synergies.

The deal has been unanimously recommended by TNT’s supervisory board. TNT’s largest shareholder, PostNL, also said it would tender its 14.7 percent stake to FedEx. PostNL shares rose 17 percent.

“Smart Move”

European regulators’ decision to block UPS’s bid for TNT dealt a blow to the Dutch firm, which had been counting on adopting much of UPS’s logistics backbone.

TNT, whose European market share has slumped by as much as 5 percentage points since that deal fell apart, has cut costs, sold operations and invested in its road network in an effort to hold on to customers in a weak European market for business package deliveries.

“There is no regulatory risk whatsoever,” said Kepler Cheuvreux analyst Andre Mulder of the proposed FedEx deal, calling the offer fair in view of TNT’s weaker market position.

“FedEx made a smart move and their rivals can do virtually nothing,” he added.

FedEx’s decision to bid followed a 17 percent drop in TNT shares over the past year, versus a 21 percent rise in the benchmark Dutch AEX index. A stronger U.S. dollar against the euro will also have worked in the U.S. firm’s favor.

TNT warned in February it expected tough trading to continue in its main western European markets. (Reuters)