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Deutsche Post agrees £242.7m deal to buy UK Mail

German owned Deutsche Post (LSE: 0H3Q.L - news) has agreed to buy UK Mail (LSE: UKM.L - news) for £242.7m in a deal which will create the second largest parcel firm after Royal Mail (LSE: RMG.L - news) .

The German postal firm has bought UK Mail as part of its European expansion drive. Deutsche Post board member Jurgen Gerdes said it offers a complementary fit with the firm.

"The ongoing expansion of our parcel network in Europe is driven by increasing demand within our e-commerce customer base for cross-border deliveries," he said.

"UK Mail is a well-run business and an established provider of quality delivery services in the UK," he added.

UK Mail shareholders will receive 440p per share in cash from the acquisition and may also be entitled to receive an interim dividend of 5.5p per UK Mail share.

Directors at UK Mail, who deem the deal to be "fair and reasonable" are encouraging shareholders to vote in favour.

The parcel delivery company endured technical problems last year after it relocated operations to a new site.

This led to higher costs, lower profits and caused the share price to halve over the last 18 months.

"UK consumer are amongst the most e-commerce savvy and the attractions of serving that market behind this deal," said Andrew Jeffs, partner at Cavendish Corporate Finance.

"Combined with the fall in sterling against the euro, Deutsche Post clearly saw a strategic buying opportunity," Mr Jeffs added.