Japan Post sets its sights on international expansion with Toll acquisition

This morning Japan Post Holdings announced the acquisition of Australia’s Toll for AU$6.49bn (US$5.07bn). According to Toll’s press release, the agreement consists of a cash payment of AU$9.04 per share which represents a 49% premium to February 16’s closing price and a 53% premium to the three month volume weighted average price of Toll shares, an implied market capitalization of AU$6,486m and an implied enterprise value of AU$8,019m.

This is one of the largest take-overs in the logistics sector over the past decade and could result in the creation of a major logistics service provider. However both companies are quite regionally focused with Japan Post in particular heavily concentrated on domestic business.

Japan Post’s offer marks the second acquisition by a Japanese company in just a matter of two days after Kintetsu World Express picked up NOL’s APL Logistics subsidiary earlier this week.

Japan Post Holding’s is preparing for an IPO later this year and it is likely that the Toll acquisition is part of a strategic realignment both in terms of diversifying Japan Post’ geographical presence and the development of wider logistics capabilities. Toll has both a sizeable Express business as well as mid-sized contract logistics and forwarding operations. Japan Post has already established e-commerce solutions and striking up partnerships with such logistics companies as Senkyu, GeoPost SA and Lenton Group Ltd to offer international parcel delivery service.

Toll has a history of highly aggressive expansion based on an acquisition driven business model but this has slowed recently as it struggled to digest its diverse purchases. Its recent performance has seen falls in revenue and profits hit by significant write-downs.

This acquisition will place Japan Post in direct competition with the likes of DHL, FedEx and UPS. What’s more among others within the hot Asia-Pacific region it will go head-to-head with Singapore Post which also has reinvented itself with a strong emphasis on e-commerce and an investment backing from Alibaba.

For the likes of DHL, FedEx and UPS, the logistics, freight forwarding and express fields are changing as new entrants enter these fields. Asia-Pacific has long been viewed as a fantastic opportunity and for these integrators, they have indeed meant success but the rise of home-grown competition such as Japan Post will likely bring about a new set of rules for all to play by.

More to follow.