Private equity firm Allegro has agreed to buy Toll Group’s Global Express unit from Japan Post as it seeks to turnaround the struggling business and capitalise on an e-commerce boom.
Japan Post will receive about $US10m ($13m) for the unit which boasts annual revenues of more than $3bn, and following the sale, Toll will retain its international logistics business.
The pair entered exclusive talks last week with Allegro to take on liabilities for the unit thought to be worth hundreds of millions of dollars.
Allegro is securing $500m of debt and equity funding to be used to fund the business turnaround and no additional loans are being taken on in addition to those in place with the division, say sources.
The private equity fund said the business has a “crucial role to play as an enabler for e-commerce”, helping to underpin the economic recovery of Australia and New Zealand as the twin nations emerge from the COVID-19 pandemic.
Allegro said Toll’s Global Express unit, which would retain its name over a two-year transition period, would be chaired by one of its founding partners, Adrian Loader.
“The business has faced challenges, but we are excited by the opportunity ahead and have great confidence that Toll Global Express can realise its full potential,” Mr Loader said.
“Allegro is committed to a transformation program, underpinned by $500m in funding to support and grow the business.”
Allegro said the Global Express arm had high quality assets and was number one in two of its core market segments.
Toll chairman John Mullen described the agreement as consistent with Toll’s strategy to focus on its Asia-Pacific logistics strengths and the unit fitted 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,” he said in a statement.
The divestment comes after Japan Post announced it was offloading the division in November.
Logistics operator Qube Holdings dropped out of the race for the Global Express unit in February and said it would be watching whether other Toll divisions are subsequently put up for sale with Japan Post retaining ownership of Toll‘s logistics and forwarding divisions.
Qube is watching whether other Toll divisions are subsequently put up for sale with Japan Post retaining ownership of Toll‘s logistics and forwarding divisions.
Toll’s billionaire co-founder Paul Little also ruled himself out of the bidding due to the task of overhauling the loss-making unit.
A sales process run by JPMorgan and Nomura drew interest from a number of private equity groups, with the contest narrowing to Allegro Funds and Platinum Equity in the final stages.
Sources say that Platinum put forward a higher offer for the unit, but it came with more conditions, whereas the Allegro proposal offered more certainty.
Japan Post purchased Toll Holdings, which was founded by Mr Little, for $6.5bn in 2015, but it has proved to be a difficult experience for the Japanese group.
Toll posted a shock $4.8bn writedown two years later and has since invested $2bn into Toll.
Toll‘s global forwarding division head, Thomas Knudsen, took over the top job in January 2020 after former boss Michael Byrne embarked on a vast global restructuring program with five divisions being reshaped into three, 26 business units shrinking to 11, over 2000 jobs cut and operations in five under-performing countries closed down.
Global Express, which has been suffering from losses, provides express parcel, freight delivery and domestic forwarding services in Australia, and transport and contract logistics services in New Zealand.
It is understood Platinum was working with advisory firm Gresham and also PwC, while Allegro used insolvency firm McGrath Nicol and law firm Herbert Smith Freehills as well as Macquarie Capital.
Allegro tapped Scottish Pacific, CBA and Gordon Brothers for funding and Skye Capital Advisory for funding advice, while Platinum was using Bank of America.
Allegro has a track record of taking on difficult operations. When it bought the Australian general merchandise division from cash-strapped Steinhoff in 2019, it controversially placed the Harris Scarfe division into administration only weeks after the deal.
Harris Scarfe was later sold to Spotlight Group, while the Best & Less operation within the business is earmarked for a float.
-additional reporting Perry Williams
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