Feb 19, 2015

Japan Post to acquire Australia's Toll Holdings


Taizo Nishimuro, president of Japan Post

On Feb. 18, Japan Post announced it would purchase 100% of the outstanding shares of Australia's Toll Holdings (Toll) and begin the procedure of making it a subsidiary. The purchase price will be Y620 billion (based on a rate of Y95 per AU$1.00). Toll has built a business of freight forwarding, third-party logistics (3PL) and express service having strengths in the region of Asia-Pacific. In deploying an international logistics business, Japan Post will position Toll as a platform company and use its expertise and experience to expand its revenue in that business.

Acquiring the stake must meet the conditions of approval at the Toll shareholders' meeting planned for May and approval by Australian courts and regulatory authorities. The procedures of acquisition will be completed in early June. Toll had consolidated operating revenue of AU$8,811 million in June 2014 and consolidated EBITDA of AU$710 million. Broken down by segment, its sales consisted of 25% global express shipping, 23% Australian domestic freight forwarding, 18% global freight forwarding, 17% resource and government logistics and 16% global logistics.

On Feb. 18, Taizo Nishimuro, president of Japan Post, held a news conference in Tokyo. The salient points of his remarks as follows:

▪Japan Post has accumulated experiences for many years in the field of delivery. In the fields of 3PL and business-to-business delivery, it has very little expertise and knowledge even in the Japanese market. Which can be translated that we have practically no experience in the global market. In conclusion, Toll is the ideal partner and there is no other like it. It actually has an implementation unit and bases in 55 countries. Moreover, its earnings continue to grow steadily. It can contribute to the earnings of Japan Post as well.

▪After the acquisition, Japan Post is considering to let some of current executive members stay in the management of Toll. It will become a wholly-owned subsidiary of Japan Post, so some personnel of Japan Post will be assigned to work at Toll as well. Some will be directly in charge of it.

▪Toll is a major Australian corporation and its business is globally extended, and it also has well-formed ideas about the future. He also knows that Toll has a firm management attitude in business it is currently conducting. Such management personnel will surely be a big support to Japan Post. Gaining a partner in the form of acquisition means clearly a matter of "buying time." It is possible Japan Post starts a new venture by putting in a lot of effort and time, but rather than using up a lot of time in vain, it opted for a complete new venture in the here and now.

▪Japan Post must be regarded as a global logistics company. The times when a company looks at only the market in Japan to successfully do logistics business are already over. Given that situation, this is the first step forward into the global market. Japan Post will take this opportunity and will make use of it effectively.

▪Japan Post has been told that the natural resource distribution business Toll has built would be a big advantage, but prices of resources are falling throughout the world. However, we are not thinking of giving up this part of the business. We probed on this point but the current management team said it is important socially to take various steps including reducing the size of that venture to keep it going and they definitely want to do it and they are taking measures to avoid losses. Japan Post had two companies perform valuations and give expert opinions regarding the suitability of the purchase price. He said the price falls within that range.

▪Toll has some 400 employees in its Japanese subsidiary. Management of the company has been sound. Prime Minister Tony Abbott visited the subsidiary when he was in Japan. It is small but Japan Post will value it and grow it in importance.

▪Toll had never been put up for sale on the market. The 3PL field is the one in which we are the most lacking and we researched what companies would most strengthen us in that area, including Japanese companies. One of the Japanese companies turned us down, but we approached Toll believing it is a perfect company among those we are currently considering to partnering.

▪Nothing has been decided about the future of Japan Post Sankyu Global Logistics.

▪We have had many experiences (including tie-ups with international logistics businesses), and that is precisely why we decided to purchase one company as the best method currently available to us. There have been many cases so far, but our management decisions have grown amid initiatives that could not be called successes.

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