Japan Post Holdings Inc flexed its muscles with a US$5.07 billion takeover bid for Australia’s Toll Holdings Ltd yesterday in a move set to bolster its appeal ahead of what could be one of the world’s biggest IPOs later this year.
The behemoth, a state-owned global postal and logistics player, unexpectedly offered A$9.04 a share for Toll, a 49 percent premium to the company’s closing price on Tuesday, valuing it at A$6.49 billion (US$5.07 billion).
Under the proposal, the Melbourne-based transport logistics giant will be run as a division within Japan Post and retain the Toll name, with the company’s chief executive Brian Kruger reporting to his counterpart Toru Takahashi.
Toll has a global network spanning road, air, sea, and rail routes with significant operations in Asia, and Takahashi said it was a perfect fit for Japan Post as it looks to expand its international footprint.
“We believe the combination of Japan Post and Toll will be a transformational transaction for both our companies and we are very pleased we have been able to reach agreement,” he said. “In partnership with Toll we are starting a new chapter of looking outward and becoming a leading global player.”
Toll chairman Ray Horsburgh recommended that shareholders back the deal.
“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,” he said. “Together, this will be a very powerful combination and one of the world’s top five logistics companies.”
A shareholder vote is to be held in May, with the deal also requiring approval from Australian Treasurer Joe Hockey under the nation’s foreign investment laws.
Kimber Capital head of research Greg Fraser said it was too good an offer to reject.
“I don’t think anyone will say no to it. It’s a huge premium,” he said.
Toll shares rocketed nearly 50 percent when they relisted yesterday, settling around A$8.94 in early afternoon trade, slightly below the offer price.
The government of former Japanese prime minister Junichiro Koizumi split the state-owned Japan Post into four units in 2007 to handle deliveries, savings, insurance and counter services at each of its post offices.
The government retained full ownership of the group at first, with plans for the bank and insurance units to go fully private by 2017.
However, the plan was stalled after the long-ruling Liberal Democratic Party (LDP) lost power to the Democratic Party of Japan between 2009 to 2012.
After returning to power in 2012, the current LDP-led government resumed the privatization project with Japan Post in December confirming it will list its shares in Tokyo this year.
IG Markets strategist Stan Shamu said the Toll deal was a win-win.
“Japanese companies hold an enormous amount of cash on their balance sheets and, given the two-way trade between Australia and Japan, this is a solid move,” he said.
Toll, which was founded in 1888 as a horse-and-cart coal haulage business in the Australian port town of Newcastle, said the merger would enhance service to existing and new customers.
“The proposed combination is a reflection of the strategic value of our business and our strong footprint throughout the Asia-Pacific region,” Kruger said. “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.”
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