Wealthy Japan Post is poised to embark on an ambitious international growth strategy afteragreeing to buy Australia’s leading express and freight company Toll Group for a massive A$6.5
billion (US$5.1bn) in a spectacular surprise deal announced today.The agreed acquisition, which is likely to be one of the top deals this year in theinternational express and parcel market, will catapult the cash-rich Japanese postal group into theglobal logistics market with a leading position in Australia and a strong regional presence inAsia, and give it a “global growth” story for its planned mega-IPO later this year.
In future, Toll Group will become a Japan Post division, operating its express and freightservice under its own brand, as the Japanese group’s “key growth platform” in the worldwidelogistics sector. Toll’s management will remain in place with CEO Brian Kruger reporting to JapanPost President and CEO Toru Takahashi.
Takahashi said: “We believe the combination of Japan Post and Toll will be a transformationaltransaction for both our companies and we are very pleased we have been able to reach agreement. Inpartnership with Toll we are starting a new chapter of looking outward and becoming a leadingglobal player.”
He told reporters on a conference call that Japan Post would seek more acquisitions in Asia andcould also look to Europe and the Americas for further expansion. “It would depend on whether wewere able to find appropriate targets,” he commented. Last year Japan Post already signed a dealwith La Poste’s subsidiary GeoPost to launch an international parcel service and take a minoritystake in Hong Kong-based Lenton Group.
For Toll Group, the takeover ends its planned withdrawal from Asia. Last November, the companysaid it would sell its Global Express Asia business and several other “non-core” activities in areversal of its expansion into Asia launched several years ago. Toll Global Express Asia is anexpress parcel business headquartered in Singapore that operates in markets including China andHong Kong. Toll admitted that the business lacked the critical mass needed to be competitive in theregion.
Under the terms of the acquisition, Japan Post would pay A$9.04 per share in cash for theAustralian company. This is a 49% premium to yesterday’s closing price and a 53% premium to thethree month volume weighted average price of Toll shares. The offer price represents an impliedmarket capitalisation of A$6,486 million for Toll Group and an implied enterprise value of A$8,019million (including net debt of A$1,533 million).
Toll said its board believes the offer “is a compelling transaction for shareholders andprovides a unanimous recommendation to vote in favour of the scheme”. However, it will appoint anIndependent Expert to prepare a report on whether the offer is in the best interests of itsshareholders. The board recommended that shareholders should vote to accept the offer at ashareholder meeting in May and if approved it would be implemented in early June.
In response to the announcement, Toll’s share price soared by about 48% today as investorssnapped up shares to cash in on the offer. Toll shareholders on register as at 2 March 2015 will beentitled to a $0.13 per share fully franked interim dividend.
Toll Chairman Ray Horsburgh said: “We are delighted to recommend to shareholders that Toll joinswith Japan Post. Japan Post is one of the world’s leading postal and logistics companies and Tollis the largest independent logistics group in the Asia Pacific. Together, this will be a verypowerful combination and one of the world’s top five logistics companies.”
Toll CEO Brian Kruger added: “The proposed combination is a reflection of the strategic value ofour business and our strong footprint throughout the Asia Pacific region. It will deliver greatopportunities for our staff, customers and strategic partners. The great Toll culture built onsafety and operational excellence will work well alongside Japan Post’s established values. I amdelighted to have been invited to lead this powerful new division of Japan Post and look forward toworking with the rest of the group.”
He added: “Toll has become an iconic Australian transport and logistics business withsignificant operations in Asia. We will be complementary to Japan Post, and closely aligned in ourtarget markets. Combined we will have an expansive geographical footprint with Toll providingexpertise in the global logistics and transport markets. Japan Post will bring extra capability,financial strength and significant scale to accelerate growth. Together we will offer an enhancedvalue proposition while delivering innovative, efficient and cost effective solutions to ourcustomers.”
Toll is Asia Pacific’s largest independent logistics group providing specialist logisticsservices, employing approximately 40,000 people across some 1,200 locations in more than 50countries. In the year ending June 2014, the company increased revenues by 1.1% to A$8.8 billion(€6.2 billion). Total earnings before interest and tax were up 4.3% to A$444.4 million and netprofit after tax was also up 5.7% to $298.5 million, excluding non-recurring items.
Japan Post is a subsidiary of Japan Post Holdings, established in 2007 under the Postal ServicePrivatization Act in Japan. Japan Post Holdings provides postal, banking and insurance servicesthrough three wholly owned subsidiaries (Japan Post, Japan Post Bank, Japan Post Insurance). JapanPost Holdings had consolidated reported revenue of JPY 15,240 billion and net profits of JPY 1,104billion in the financial year ended 31 March 2014.
