TWO of the world’s biggest postal groups, Fedex Corporation and UPS, are in advanced negotiations to set up a groundbreaking European strategic alliance with Royal Mail.

Allan Leighton, chairman of Royal Mail, is still deciding which of the two potential American-owned partners to pick but it is thought he is close to creating a new company that could transform the financial prospects of the British mail group. Last week Royal Mail received a £3 billion bail-out to help resolve its huge pension deficit, modernise its letters business and fund the loss-making rural post office network.

But Leighton did not reveal the talks with the two US postal giants — Fedex, which is capitalised at $33 billion (£17.5 billion), and UPS, worth $52 billion. He wants the European operations of Fedex or UPS to team up with Royal Mail’s General Logistics Systems. GLS runs a pan-European parcels business and is Royal Mail’s most profitable operation.

It made sales of £1 billion last year and earnings before tax, depreciation and amoritisation of £100m. This figure could double over the next two years.

A source familiar with the talks said the big attraction for Royal Mail is that its European parcels business is unregulated and, unlike in Britain, its charges are not set by a third party. Leighton wants to use GLS to attack the postal markets of Germany and France in the same way that overseas companies are trying to break into the British market. It is hoped this will lead to making a big inroad into parcels and letters, as well as the booming “packet” business that has exploded thanks largely to Amazon and other online retailers.

A European partnership would give GLS a commanding position and the intention is to combine delivery networks. The aim is to eventually break into Asia and India.

UPS employs just under a tenth of its 407,000 workforce in Europe and runs a 7,000- strong delivery fleet. GLS has subsidiary operations in 17 European countries, employs 14,500, has 52 depots, 4,580 vehicles and promises delivery across Europe within a 24 to 96-hour period. Fedex has operations in 215 countries and delivers more than 6m shipments every business day, but does not have operations in all European countries.

Fedex already has an alliance with Geopost, the parcel and logistics company owned by La Poste, the French operator. This enables it to provide services in France and Belgium.

It is thought that GLS, as a standalone business, is worth at least £1 billion but, under a new ownership structure with a partner, this could grow.

The identity of GLS’s partner will be watched closely by European rivals. The continental postal market will eventually open up to competition in the same way as Britain has, and Leighton wants the infrastructure in place to be a leading player in the consolidation.

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