Taking a Toll: How Japan Post's big global bet unraveled
By Thomas Wilson and Byron Kaye
TOKYO/SYDNEY (Reuters) - In February 2015, bankers working on Japan's biggest IPO in three decades woke to news that left them shaken. Their client had just closed a multi-billion dollar deal - but had kept them firmly out of the loop.
Just months ahead of its listing, state-owned Japan Post Holdings Co (6178.T: Quote) was buying Australian logistics firm Toll Holdings for A$6.5 billion ($4.9 billion), leaving underwriters scrambling to understand the impact on the selldown.
"My heart skipped a beat when I read the Nikkei (newspaper) that morning," one banker who worked on the deal told Reuters. "Clients have to be honest and at least tell us before making the deal, since it would impact the sale price and business forecasts."
They were right to worry. Barely two years after trumpeting the deal, Japan Post last week said a 400 billion yen ($3.6 billion) writedown on Toll would push it to an annual loss in its first year as a listed company.
The massive impairment charge has drawn into focus the deal's rich premium, speed and timing, raising questions over Japan Post's due diligence and its plan to integrate Toll's sprawling business into a global conglomerate spanning postal delivery, banking and insurance.
Japan Post acknowledged concerns over the due diligence process and its management of the company, but blamed the writedown on worse-than-expected economic pressures.
"During the acquisition, due diligence was implemented taking into account the opinion of accounting, taxation, legal and financial experts," said Hideo Murata, a spokesman for Japan Post. "Commodity prices fell faster than we had thought, and we couldn't imagine the direct impact on Toll's earnings."
The saga may further undermine Japanese efforts to persuade investors to believe in its corporate governance reforms which have been shaken by high-profile failures of foreign takeovers by companies including Toshiba Corp (6502.T: Quote) and Kirin Holdings Co Ltd (2503.T: Quote). Continued...