News of the takeover of Toll meant its share price spiked on the price premium being paid for the transport and logistics giant. The proposed deal will see the Toll Group become part of an expanded Japan Post, as the Asian logistics arm of the Japanese postal operation.
The proposal will see Japan Post pay $9.04 per share for Toll Holdings. This valuation represents a 49 per cent premium on the value indicated by Toll’s share price the day before the announcement. The cash offered implies a market capitalisation of $6.48 billion for the group, with around $2 billion in further investment likely to follow.
The Japan Post deal is expected to see little outward change for the Toll operation. They are buying the business for its network, expertise and personnel, in order to extend the reach of the Japanese business from a purely domestic postal service in Japan to a player in logistics throughout the Asian region.
“This transaction is not just an endorsement of Toll. It’s a real endorsement of Australian business,” said Toll Chairman, Ray Horsburgh, announcing the sale. “This is an $8 billion proposed investment by one of Asia’s largest companies into an Australian skill-based business. They are not buying Australian commodities, they are buying skill and knowledge.”
So far the agreement to sell to Japan Post remains conditional on approval by the Foreign Investment Review Board. The process leading to the deal only began in January when the initial proposal was forwarded to Toll by Japan Post. The deal was agreed, in principle, just three weeks ago. The transaction is likely to take four months to complete.
“We believe the combination of Japan Post and Toll will be a transformational transaction for both our companies,” said Toru Takahashi, President and CEO of Japan Post, at the announcement. “The businesses are complementary and the fit makes good sense. Combining our companies will create a truly global company and we have plans for significant future investment and further growth.”
For Japan Post, it is Toll’s strong position throughout the Asia Pacific region which has made it an attractive partner. The business has set up operations around the region using tried and tested, as well as efficient, systems to handle freight and logistics for multinational customers.
Until its planned Initial Public Offering on the Japanese share market later this year, Japan Post has been a government owned business. The Toll deal is expected to make Japan Post shares even more attractive to potential investors and show the enterprise’s intention to grow as a logistics provider over a much wider area than it has in the past.
Japan Post are not likely to stop here, and Takahashi talked about the company looking at further mergers and acquisitions in Europe and North America to create a global logistics operation. He particularly mentioned Toll’s expertise in buying companies and growing by acquisition as being an important factor in the proposed deal.
The takeover serves to demonstrate the value put on the innovation and skills developed by the transport and logistics industry here in Australia, by the wider world. Toll have not only become a dominant player in Australia, but also a ubiquitous presence all over Asia, adapting systems developed here to Asian, and global, business.