News / The wedding's off – UPS and Estafeta walk away from planned takeover

Fourteen months ago UPS was poised to take over Mexican logistics firm Estafeta and form a juggernaut in the Mexico-US cross-border arena. Now the pair have walked away from the alignment.

The takeover aimed to open a new chapter in the cross-border market, especially in the parcel segment.

With a national network of 129 operating centres, Estafeta reaches 95% of the Mexican population; its ground operations are supplemented by an air network of six B737-400 freighters connecting 12 Mexican airports and Miami. Estafeta also offers forwarding, supply chain solutions and logistics consulting.

The Mexico City-based company commands about 24% of the Mexican parcel and courier market. With UPS estimated to hold around 18%, their combined market share could have been as high as 42%.

When UPS announced the takeover in July 2024, under the banner of its “better and bolder” strategy, the mood was bullish. It was to be a decisive step forward in a partnership that had been formed in 2020.

“Global supply chains are shifting, Mexico’s role in global trade is growing, and Mexican SMB and manufacturing sectors are looking for reliable access to the US market. There is no better way to capitalise on these trends than by combining the size and scale of UPS with Estafeta,” commented UPS CEO Carol Tomé at the time.

But the end of the betrothal has been a more subdued affair.

In a regulatory filing with the US Securities and Exchange Commission UPS wrote that it had “terminated” its plans to acquire Estafeta “due to the inability of all closing conditions to be satisfied”.

Estafeta’s statement was equally tight-lipped, merely stating that the parties had been unable to reach the necessary agreements on terms. This has left observers speculating about the real problems that doomed the acquisition.

UPS management had expected to close the transaction by the end of last year. However, it wasn’t until May that the deal received the green light from Mexico’s Federal Economic Competition Commission.

Some observers have pointed to uncertainty over US-Mexico trade relations, rules governing cross-border parcel flows and the headwinds UPS is facing as likely factors weighing on management appetite for the deal.

In a note to clients, Zack’s Investment Research cited pressure on UPS from weak demand, pointing to a 3.8% decline in average daily volumes in the first half of the year, and a 2.7% drop in revenue in Q2. It also highlighted pressure from high costs and reports of plans to shed 20,000 jobs and close 73 facilities.

Mexican observers have emphasised the ‘Trump effect’ – the protectionist stance, with pressure on bilateral agreements and abrupt regulatory changes like the end of de minimis exemption for parcels entering the US, which has reduced the profitability of this traffic.

UPS has  however, issued a statement reaffirming its strategic focus on Mexico. It said: “We remain committed to growth in Mexico and delivering the reliable service our customers expect.”

Estafeta management commented the firm would continue to operate with “solidity, quality and reliability” and would continue to pursue growth independently.,