By Atsuko Fukase and Eric Pfanner
TOKYO--With two big international acquisitions in two days,
Japanese freight shipping and parcel delivery companies are pushing
overseas in an effort to challenge the European and U.S. giants
that dominate the business.
Japan Post Holdings on Wednesday said it had agreed to acquire
Australian logistics company Toll Holdings Ltd. for $5.1 billion. A
day earlier, Kintetsu World Express Inc., a Japanese airfreight
operator, said it had agreed to buy APL Logistics Inc. from
Singapore-based Neptune Orient Lines Ltd. for $1.2 billion.
"These deals give the Japanese firms a vast presence in the
Asian markets, where the Europeans have already been very active,"
said John Manners-Bell, chief executive of research firm Transport
Intelligence.
The acquisition was the first major overseas deal for Japan
Post, and will vault it to the No. 5 global spot in the logistics
industry by revenue, up from its current position at No. 8, the
company said. Deutsche Post AG of Germany, the U.S. Postal Service,
United Parcel Service Inc. and FedEx Corp. are the world's top four
players, according to data collected by Japan Post.
Squeezed by tough competition and slow growth in their domestic
markets, European postal services and railways have forged abroad
aggressively. Deutsche Post, which was privatized in 1995, acquired
DHL Express more than a decade ago. The German railway, Deutsche
Bahn AG, in 2006 acquired BAX Global, another logistics giant.
Now Japan Post faces similar stagnation in its domestic market
ahead of its own initial public offering planned for later this
year, giving it little choice but to look abroad for growth.
"In the logistics business, amid the country's shrinking
population, global expansion is critically important. The days of
doing business only domestically are over," said Japan Post
Holdings Chief Executive Taizo Nishimuro.
Japan Post and Kintetsu join a string of Japanese companies that
have been pursuing overseas acquisitions in an effort to expand in
new markets. In addition to the logistics deals, Canon Inc. said on
Feb. 10 that it had agreed to acquire Sweden's Axis Communications
AB for $2.8 billion.
Japanese manufacturers have moved production to China and
Southeast Asia to take advantage of lower labor costs--even though
there are some signs of a return to Japan as the weaker yen lessens
the relative advantage.
Japanese manufacturers may prefer to work with domestic
logistics companies to supply their overseas factories, analysts
said. "They need the glue to hold their supply chains together,"
Mr. Manners-Bell said. "I'm surprised that it has taken so long for
these big deals to come through."
The Melbourne-based Toll, which traces its roots to 1888, has
struggled to gain traction in competitive Asian markets. In
November, it said it would try to sell loss-making and unwanted
assets in an effort to turn its performance around.
Toll has urged its shareholders to accept Japan Post's offer of
9.04 Australian dollars ($7.05) a share, a 49% premium to its last
closing price of A$6.08 "Together, this will be a very powerful
combination and one of the world's top five logistics companies,"
Toll Chairman Ray Horsburgh said.
Japan Post Holdings needs to demonstrate the viability of its
postal and delivery services unit ahead of a planned initial public
offering later this year. Investors have questioned the growth
prospects of the unit, Japan Post Co., noting that around 80% of
the parent company's profits come from its banking and insurance
units, Japan Post Bank and Japan Post Insurance.
Japan Post Holdings said in December that it aims to sell up to
50% of itself and its two financial units in phases following
separate but simultaneous IPOs. Analysts say the IPOs could raise a
combined $10 billion to $20 billion. Currently, the Japanese
government owns 100% of Japan Post Holdings, which in turn wholly
owns its postal, banking and insurance units. The government plans
to use the money raised to help finance reconstruction following
the March 2011 earthquake and tsunami.
Japan Post Holdings offers services ranging from package
delivery to savings accounts, and sells life insurance and
financial products at more than 24,000 post offices through Japan.
Because of its market reach, the company has long faced criticism
from commercial banks and insurers that it has an unfair
advantage.
Privatization of the company was a top goal of former Prime
Minister Junichiro Koizumi, who won a campaign on the issue in
2005.
Mr. Nishimuro has said he would maintain unprofitable postal
offices as a public service.
"Given profitability and efficiency, I understand we should
reduce the number of small postal offices and people in rural
areas, but I would say clearly we won't do that," he told The Wall
Street Journal previously.
Ross Kelly contributed to this article.
Write to Atsuko Fukase at atsuko.fukase@wsj.com and Eric Pfanner
at eric.pfanner@wsj.com
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