First bids for Japan Post’s Express unit to arrive next week

First bids for Japan Post’s Express unit are expected to arrive next week. Photo Jeremy Piper/ Oculi

Toll Holdings owner Japan Post is likely to gain a clearer picture next week as to whether buyers exist for its entire $3.5bn Express division.

It is understood that first-round bids for the business in the JPMorgan and Nomura-run contest are due on December 23.

The understanding is that the Express division consists of three components, including Express Parcels, the Toll freight shipping operations across the Bass Strait to Tasmania and an intermodal operation.

While private equity firms BGH Capital and Pacific Equity Partners have initially been interested in buying the whole of the Express operation, according to sources, some market experts believe they will only line up for Express Parcels when next week’s deadline for first-round bids arrives.

Anchorage Capital Partners is also in the competition, but the understanding is that its interest centres on the Express Parcels operation only.

Express Parcels competes with Australian Post and has been a loss-maker, providing a major headache for Toll.

Some believe that any buyer would obtain the operation for a nominal sum with the hope of turning it around to become profitable.

The Toll shipping operations involves a freight service across Bass Strait and is said to be a strong performer and profitable.

It was originally part of logistics company Brambles, while its major competitor is a local group called Chas Kelly Transport. Market analysts believe that that arm would appeal to a different group of buyers to those interested in the parcel operations.

Logistics business Qube Holdings is a potential suitor, while other buyers could include those that more fit the description of infrastructure investors such as Morrison & Co, Queensland Investment Corporation or Canada’s Ontario Teachers’ Pension Plan.

The Intermodal operation could also be attractive to Qube, although some market analysts say an express intermodal service may not be appealing for Qube’s traditional customers.

Qube’s rival Aurizon would also probably take a look, but most take the view that it would not wind up as the buyer of the business, given that its focus is more on rail and coal assets.

Private equity firm Brookfield is also said to be keeping a close eye on the operation, given its history investing in the sector.

It is understood Toll’s preference is to sell the division in one line, but a break-up may be its only chance of a sale if buyer interest is scarce.

Toll was founded by Australian billionaire Paul Little and is owned by Japan Post, which outlaid $6.5bn for the operation in 2015.

The Japanese company booked a shock $4.8bn writedown on Toll two years later. It has since invested $2bn in Toll, but a goal for it to be cashflow-positive by April was not met.

While COVID-19 has meant online trade has been booming, Global Express has suffered from volatility and cyber-attacks.

It lost $100m in the June quarter, which may deter some bidders, but Toll says earnings for the division improved by $80m in the September quarter.

Toll’s two other divisions, logistics and forwarding, will remain under Japan Post’s ownership.