Japan Post to buy Toll for $5.1 billion

The deal will help answer critics who say state-owned Japan Post lacks a global growth story to attract investors and offset the decline in its domestic postal service business.

By (Reuters)

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Published: Thu 19 Feb 2015, 10:49 PM

Last updated: Thu 25 Jun 2015, 7:35 PM

Sydney/Tokyo — Financial giant Japan Post Holdings Co Ltd launched its global expansion strategy with its largest ever deal on Wednesday, agreeing a A$6.5 billion ($5.1 billion) takeover of Australian freight and logistics firm Toll Holdings Ltd.

The proposed cash acquisition would give Japan Post  a reach spanning 55 countries and a surge in earnings power ahead of a planned listing later this year, as it aims to become a leading international logistics player as well as one of the world’s biggest financial institutions.

The deal will help answer critics who say state-owned Japan Post lacks a global growth story to attract investors and offset the decline in its domestic postal service business. “We have made a first step toward becoming a global logistics company ... The days are over when logistics companies can survive by shutting themselves within Japan,” Japan Post Holdings President Taizo Nishimuro told reporters in Tokyo.

Combined, the two would be the world’s fifth-largest logistics group after FedEx Corp in terms of revenue, Japan Post said. Japan Post has total assets of some ¥295 trillion ($2.47 trillion) including its mail, banking and insurance service. The banking arm alone ranks 17th in the world, even though its overseas business is currently limited to joint operations in several Asian countries. By snapping up Toll, the Japanese giant will gain a wealth of experience in offshore deals as it tasks the Australian firm with leading acquisitions throughout Asia, Europe and North America.

In what would be Australia’s fifth-biggest inbound acquisition and the largest takeover of an Australian company by a Japanese firm, Japan Post offered A$9.04 per Toll share a 49 per cent premium to Toll’s last closing price. Toll’s directors described the valuation as “compelling” and unanimously recommended it.

Toll shares leapt 47 per cent after the deal’s anouncement to A$8.95 on Wednesday, helping push the broader Australian market 1 per cent higher. The deal also helped buoy the Australian dollar, which rose more than 1 per cent against the yen overnight. 

“Together this will be a very powerful combination and one of the world’s top five logistics companies,” Toll Chairman Ray Horsburgh said in a statement.

 Under the deal, Toll will keep its name and current management. Takahashi said there would be no major job cuts at the Australian target.  Toll’s ex-CEO Paul Little, who led the company’s expansion into Asia and quit after 26 years in 2012, could be one of the biggest winners from the deal. He stands to make a A$325 million windfall from his 5 per cent stake.   The proposed deal was revealed as 127-year-old Toll posted a 22 per cent fall in half-year net profit. The Melbourne-based firm has been restructuring and putting assets up for sale after its Asian expansion exposed it to falling commodity prices and freight volumes. 


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