SYDNEY (Bloomberg) - Japan Post Holdings Co. agreed to buy Toll Holdings for A$6.49 billion (S$6.88 billion), giving the state-owned company an Asia-wide transport logistics network ahead of an initial public offering later this year.
Investors in Toll will receive A$9.04 in cash for each of their shares, the Melbourne-based company said in a statement Wednesday. That's a 49 per cent premium to Toll's closing share price Tuesday and would be the biggest overseas takeover of an Australian listed company since SABMiller bought Foster's Group Ltd. for US$13.1 billion in 2011, according to data compiled by Bloomberg.
"No one was expecting a bid and if they were they weren't expecting that sort of magnitude," said Chris Weston, a market strategist at IG Ltd. "If you're a shareholder today you're going to be fairly speechless."
Buying Toll would give Japan Post Holdings access to a global network spanning road, air, sea and rail routes that's more profitable than its own delivery business. The state-owned company expects to raise 1 trillion yen to 2 trillion yen as it lists units encompassing post, banking and insurance on the Tokyo Stock Exchange sometime between September and December.
The deal "will be a transformational transaction for both our companies," Toru Takahashi, chief executive officer of Japan Post Co., the holding company's postal subsidiary that's making the acquisition, said in the statement. "We are starting a new chapter of looking outward and becoming a leading global player."
Shinzo Abe's government is carrying out plans conceived by former Prime Minister Junichiro Koizumi's administration a decade ago to privatize a company that had 294 trillion yen in assets in September, exceeding the annual economic output of Brazil. Japan Post Bank Co. has 178 trillion yen in deposits, the most of any financial institution in the country.
Listing the company would help reduce the world's highest public debt burden among major economies. Japan Post Holdings held about 16 per cent of the country's public debt at the end of September through its banking and insurance arms.
The takeover requires approval from Australian Treasurer Joe Hockey following scrutiny by the nation's Foreign Investment Review Board.
Japan Post was established in 1871 as part of the late 19th-century modernization drive by Japan's government. Toll began life 17 years later as a horse-and-cart coal haulage business in the Australian port town of Newcastle. The Australian company now gets about 19 percent of its revenue from Asia, according to data compiled by Bloomberg.
"This will be a very powerful combination and one of the world's top five logistics companies," Ray Horsburgh, chairman of Toll, said in the regulatory statement.
Toll said Wednesday that net income in the six months ended Dec. 31 fell 22 per cent to A$136.6 million as revenue declined 2.6 per cent. Its shares have gained 13 per cent in the past six months, compared with a 4.9 percent rise for the benchmark S&P/ASX 200 Index.
Toll shareholders will also be entitled to an interim dividend of 13 Australian cents per share, according to the statement to the ASX.
Toll's net income in the 2014 fiscal year, at A$286 million, was about 18 per cent smaller than Japan Post Co.'s 32.9 billion yen. The Japanese postal company recorded 2.77 trillion yen in revenue, almost three times Toll's A$8.81 billion.