Japan Post’s $5 billion bid for Toll Group sees the Japanese postal operator making a big play for the pan-Asian parcels and logistics market. Toll Group posted sales of US$6.9 billion in 2014 and generated profits of $229 million. Toll Group’s Board is unanimously recommending the cash offer of $9.04 per share, which values the target at just over $5 billion. The purchase would increase Japan Post’s revenue by 30%. It is subject to shareholder and regulatory approval and may happen by June 2015.
If the acquisition is successful, Japan Post will run Toll Group as a division, maintaining the Toll Group branding. Japan Post, like other global postal operators, is seeking expansion into wider global parcels and logistics markets.
Japan Post’s rationale for the bid is clear. It faces declining postal demand in its domestic market and must expand into complementary markets and regions to boost profits. The postal operator clearly stated it was seeking to focus on the rapidly growing Asian logistics market.
Japan Post has been seeking privatisation for several years and is expecting to go public in 2015. Japan Post Holdings is 100% government owned and generates revenues of around $127 billion, a large proportion of which is derived from insurance products.
Japan Post is following in the footsteps of European postal operators that have built wider logistics businesses through acquisitions. Deutsche Post, Royal Mail and La Poste have all significantly broaden their businesses through acquisition, expanding into commercial markets of logistics and express parcels.