One of four 737-300Fs operated for Toll by New Zealand-based Airwork. Photo: Toll Holdings
In what will be one of the largest deals ever done in the logistics industry, the Board of Australia-based transportation and logistics services provider Toll Holdings unanimously recommended acceptance of a US$5.1 billion takeover bid by Japan Post.
In addition to operating Japan’s postal service, Japan Post Holdings controls the world’s biggest insurance company (by revenue) and thirteenth biggest bank (by total assets). But as well as the insurance and banking segments may be doing, the postal segment is suffering the same loss of core business that has hit postal services worldwide over the last decade – email is replacing paper mail.
However, what the internet has taken away on the letter mail side of the business, it is now returning on the package-delivery side, through the explosive growth of e-commerce. And Japan Post Holdings is hoping that acquiring Toll will give it a major presence in the parcel delivery business, and in the Asian logistics arena as a whole (where Toll is currently the largest independent player).
That presence will not come cheaply. As far as we know, the only logistics transaction with a higher price tag was Deutsche Post’s acquisition of UK-based Exel in late 2005 for €5.6 billion (equivalent to just over US$7 billion at the time). Further, the $5.1 billion price represents a 49% premium on Toll’s share price prior to the bid.
Will it be worth it? Only time will tell, but the deal has to be considered not just in its own light, but also in light of the fact that Japan Post Holdings, currently government-owned, is planning an IPO sometime this year – an IPO that will likely see it valued somewhere in the neighborhood of US$80 billion. A significant logistics presence in Asia, combined with access to the booming parcel delivery market, is likely seen as making the IPO more attractive. And it will certainly be worth something to Toll’s shareholders — the company reported profit down 22% to US$106 million in its just-completed fiscal first half, so getting a 49% premium on share value is definitely a pleasant surprise.
For background on the two companies, and details of the acquisition agreement (which the companies hope to complete by mid-year), see Toll’s Board recommendation, and Japan Post Holding’s media release.
