TOKYO -- Japan Post Holdings said on Wednesday that it will unload part of Australian logistics company Toll Holdings to an Australian investment fund for 7.8 million Australian dollars ($6 million), absorbing a massive loss in the deal.
By selling Toll's logistics and home delivery operations in Australia and New Zealand to Allegro Funds, Japan Post will assume several billion dollars worth of debt and will log an extraordinary loss of about 67.4 billion yen -- or roughly $624 million -- for the fiscal year ended in March 2021.
The sale marks the latest chapter in the Japanese postal group's troubled ownership of Toll, which it acquired in 2015 for 620 billion yen in hopes of gaining international logistics know-how for fresh growth. The deal will force Japan Post, which is majority owned by the government, to reconsider its international strategy.
Japan Post does not expect the sale to have a major impact on its net profit, believing most of the loss will be offset by more than 60 billion yen in tax reductions, the result of other factors.
Japan Post picked Nomura Securities and JPMorgan Securities Japan as advisers for the deal and began the process of selecting buyers in November. Toll's lackluster performance made the search difficult.
Toll suffered an operating loss of AU$10 million for the nine months through December, owing mainly to losses in the Australia-focused segment now being sold. This segment's operating loss reached AU$83 million, widening by AU$25 million from a year earlier.
After selling the struggling Australia and New Zealand operations, Toll will retain its international logistics business.
Toll said the sale of its Global Express business is targeted for completion by June 30, pending regulatory approvals.
"The divestment is consistent with Toll's strategy to focus on being a preeminent Asia-Pacific logistics provider through its core businesses in contract logistics and freight forwarding," Toll Chairman John Mullen said in a news release.
Adrian Loader, an Allegro founding partner, said it is preparing a cash injection.
"We are excited about the future potential for Global Express and are committing $500 million in funding to continue the business' transformation and support its growth over the long term," Loader said in the release.
Toll grew out of more than 100 mergers and acquisitions, creating what analysts have called inefficiencies including a patchwork of software. A drop in logistics volume as Australia's economy slowed intensified the pressure on the group's high costs.
Two years after the acquisition, faltering earnings forced Japan Post into a roughly 400 billion yen write-down on Toll. The Japanese parent tried to overhaul the group with new management and job cuts, but making headway proved difficult.