Household Australian Name in Freight and Logistics Sold to Japanese

JAPAN – AUSTRALIA – Government owned Japan Post is set to acquire 100% of the issued and outstanding shares in Australia’s largest freight and logistics outfit, Toll Holdings for around ¥620 billion (A$6.5 billion), subject to approvals from the shareholders and relevant regulatory bodies. With the transaction estimated to be completed in early June, Japan Post hopes to establish a solid position in the Australasian market and cultivate its global business, after Japan’s postal market continued to shrink due to a decreasing population and a growing reliance on the internet.

The proposed acquisition of Toll is an important step in Japan Post’s aim to become a leading global logistics player. The Melbourne based firm will be run as a division within Japan Post and will retain the Toll name, with management also remaining in place. Toll CEO Brian Kruger, who will report to Japan Post’s CEO Toru Takahashi if the transaction is approved, said:

“The proposed combination is a reflection of the strategic value of our business and our strong footprint throughout the Asia Pacific region. It will deliver great opportunities for our staff, customers and strategic partners. The great Toll culture built on safety and operational excellence will work well alongside Japan Post’s established values. I am delighted to have been invited to lead this powerful new division of Japan Post and look forward to working with the rest of the group.

“Toll has become an iconic Australian transport and logistics business with significant operations in Asia. We will be complementary to Japan Post, and closely aligned in our target markets. Combined we will have an expansive geographical footprint with Toll providing expertise 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 enhanced value proposition while delivering innovative, efficient and cost effective solutions to our customers.”

If and when completed the transaction will deliver Toll shareholders A$9.04 per share, which represents a 49% premium to Tuesday’s (February 17) closing price and a 53% premium to the three month volume weighted average price of Toll shares, an implied market capitalisation of A$6,486 million and an implied enterprise value of A$8,019 million. Toll shareholders on the register as at March 4, 2015 will be entitled to a A$0.13 cash per share FY15 interim dividend (fully franked), payable on April 2, 2015. Toll Chairman Ray Horsburgh said:

“Japan Post is one of the world’s leading postal and logistics companies and Toll is the largest independent logistics group in the Asia Pacific. Together, this will be a very powerful combination and one of the world’s top five logistics companies. We are proud that Toll is a great Australian success story, having grown from small local origins in 1888 to this outstanding outcome today for Toll shareholders and employees. Critically, it will enhance our service to existing and new customers.

“The Board’s primary concern has always been, and continues to be, to act in the best interests of Toll’s shareholders and maximise value for them. The Board believes Japan Post’s proposal of $9.04 cash per share, which allows shareholders to receive a further $0.13 interim dividend, reflects compelling value for Toll’s shareholders.”

Toll’s revenue decreased 2.6% in the first half of 2015 (the 6 months to December 2014) to $4.4 billion as compared to the same period last year. Total operating EBIT was down 4% to $248.8 million and net profit after tax was down 3.2% to $170.2 million.

Toll’s analysis of its figures showed that domestic economic conditions continued to be challenging throughout the period with weakness in commodity prices and business and consumer sentiment slowing general activity. The impact of this was particularly seen in its Australian network businesses due to lower volumes, particularly from customers in the resource sector and from some discretionary retail and SME customers. Additionally, revenue was impacted by the contracts completed or lost in the prior period.