Sale of Toll Global Express painful for Japan Post

Toll group

Japan Post Holdings has taken a significant step in its disposal of Toll Group’s assets by agreeing to the sale of Toll’s ‘Global Express’ business. On Wednesday (April 21, 2021) it was disclosed that a deal had been agreed with Allegro Funds, a private equity company specialising in company turnarounds. The pricing around the deal was not disclosed by either party, however, press reports in Japan report that Allegro will pay “around ¥700m or US$6.5m”. If this number is accurate, it represents a huge loss on a business that was valued at billions of Australian dollars just last year. Japan Post Holdings seems to have announced a write-off of ¥700bn or $646m in parallel to the sale, which presumably is in addition to its previous value reassessments.  

Toll Group describes the Global Express business as providing “express parcel, freight delivery and domestic forwarding services in Australia, and transport and contract logistics services in New Zealand”. It traditionally represented just under half of Toll Group’s business, although profitability was variable.

The intention to sell Toll Global Express was outlined in November of 2020. Whilst it has been a core business since the creation of Toll Group it has also been a locus for Toll’s problems both in terms of operational management and financial losses.

In a statement announcing the deal, Toll Group’s Chairman John Mullen said that the divestment of Toll Global Express “is consistent with Toll’s strategy to focus on being a pre-eminent Asia-Pacific logistics provider through its core businesses in contract logistics and freight forwarding.”

Judging by this statement, Toll will look to build its future in South East Asia, although it still has a substantial business in Australia. The question that this poses is whether the existing management is able to construct a viable presence in what is a very attractive market.

There is also the question of the future ownership of Toll Group. It is hard to see what the logic of Japan Post’s continued ownership is, although the state-owned giant may wish to take time to assess its options before committing to rid itself of Toll entirely.

Toll Group remains fairly diversified in that it has a number of different businesses. It would not be surprising if some of the smaller of these would also be sold. However, it is also possible that Toll warehousing and forwarding businesses would be attractive in themselves to other companies looking to grow in Australasia and South East Asia by acquisition.

Source: Transport Intelligence, April 22, 2021

Author: Thomas Cullen