Japan Post’s sale of Toll Global Express ‘painful’

By Damian Brett

Japan Post Holdings is expected to sell Toll Global Express at a loss as it looks to offload the troubled business.

Earlier this week, Toll Group announced that it had entered into an agreement for the sale of its Global Express business to Australian private equity fund manager Allegro Funds.

The Global Express business provides express parcel, freight delivery and domestic forwarding services in Australia, and transport and contract logistics services in New Zealand.

Toll’s Global Logistics and Global Forwarding businesses are not impacted by the deal.

Consultancy Transport Intelligence practice leader Thomas Cullen pointed to reports that suggest the division will be sold for around ¥700m or $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,” Cullen said.

“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.”

The overall Toll business was bought by Japan Post in 2015 for A$6.5bn,but its value was later written down due to weak performance.

Cullen said Global Express traditionally represented “just under half of Toll Group’s business, although profitability was variable”.

“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,” he added.

On the deal itself, Toll chairman, John Mullen, said the agreement is consistent with Toll’s strategy to focus on its Asia-Pacific logistics strengths and fits with Allegro’s investment thesis of investing in Australian and New Zealand companies to realise their potential.

“We have spent the last three years transforming and strengthening Global Express and today the business is a market leader. I am confident that under Allegro’s ownership, Global Express will have the support and focus it needs to reach its full potential.

“The divestment 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.”

Adrian Loader, one of Allegro’s founding partners, said it would commit $500m in funding to continue the business’ transformation and support its growth over the long term.

The sale is subject to regulatory approvals and other customary closing conditions with the transaction targeted for completion by June 30.

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