At the current deal price, UPS is expected to be able to pay for TNT Express with two years of its free cash flow, making it an earnings positive deal even if divestitures, regulatory concerns and integration costs are significant.

Sterne Agee analysts expect UPS to earn $3.2 billion in free cash flow this year and $3.8 billion in fiscal 2013. Synergies with UPS's worldwide fleet will make the deal earnings positive, according to Jeff Kauffman of Sterne Agee, who calculates that the move may be worth up to 13 euros a share for UPS.

Benefits of a TNT Express acquisition wouldn't have been as present for UPS's main U.S. rival FedEx Corporation ( FDX), according to Kauffman, signaling that a long-rumored rival offer may not come. Meanwhile, FedEx's cash earnings abilities would make a higher bid hard to fund.

"We only calculate FedEx generating FCF after dividends of $(150) million and $420 million, implying that if FedEx responded to an E9.50 bid by UPS with a bid over E10, such a transaction would take as much as 7+ years of Free Cash Flow to pay down," noted Kauffman. He rates UPS shares a "buy" with a $110 price target and also gives FedEx shares a "buy" rating.

Still, even with an optimistic first response from analysts and investors, significant risks to the deal remain. UPS forecast that the implementation costs of the deal could total $1.3 billion over four years. The company will draw the bulk of its cash on hand and also issue new debt to pay for the deal. Atlanta-based UPS said it would use $3 billion in cash out of a total of $4.27 in cash in short term investments for the deal and issue new debt to pay for the remainder.

Overall, analyst give UPS an average price target of $88.39 a share, according to data compiled by Bloomberg. Eighteen analysts rate shares a "buy," while another 8 give the company a "hold" rating. Those analysts expect UPS to see its revenue climb to $55.9 billion, netting a $4.7 billion profit in 2012 that's expected to grow in 2013. Analysts give FedEx shares a price target of $104.47, according to Bloomberg data.

For more on UPS shares see The #1 recession proof portfolio that will make you richer and the most bought industrial stocks among investment funds.

UPS was advised by UBS ( UBS), Morgan Stanley ( MS) and Bank of America Merrill Lynch ( BAC). Goldman Sachs ( GS) and Lazard ( LAZ) gave TNT Express advice on its sale.

For more on Goldman and Lazard shares, see 2012 deals hinge on Goldman's idea of fairness and a widening performance gap on Wall Street.

Written by Antoine Gara in New York.

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