Japan Post plans to break up and sell parts of Toll Group, the Australian logistics business it bought in an ill-fated $5bn acquisition in 2015, according to people with direct knowledge of the talks.

The Japanese company — whose interests span banking, insurance and postal services — has been hit by an insurance mis-selling scandal and a recent share price collapse. The sale of Toll would highlight its broken ambitions to become a global logistics leader and attempts to convince investors it was more than a former state-owned laggard in a shrinking domestic market.

Japan Post will initially focus on finding a buyer for Toll’s Australia and Asia-focused Global Express courier services division, the people added, for which it is hoping to whip up a bidding war between private equity funds and logistics groups such as FedEx, UPS and DHL.

The company has not set a price that it hopes to raise from the sale but it is at risk of incurring a loss on the disposal on top of the $3.8bn writedown it made in 2016. The sale process is set to formally begin in November.

Once a sale of Global Express is secured, Japan Post will seek outright buyers or equity partners for Toll’s other segments. Those include businesses that provide logistical services to Australia’s resources industry, where Japanese trading houses have interests.

 That will not happen for a while, said one person involved in the process, because significant work is required to prepare those operations for a sale.

 Japan Post has engaged investment banks to begin the sale process.

 Its postal unit said it was considering various options to improve its management of Toll but declined to comment further.

Toll did not respond to a request for comment.

The acquisition of Toll was masterminded by Japan Post’s former chief executive, the late Taizo Nishimuro. In light of the large writedown and subsequent difficulties, analysts and investors have questioned whether Japan Post applied sufficient due diligence.

Five years since its Tokyo listing, the group’s shares have plummeted from their IPO price of ¥1,322 ($13) to ¥734. The company last month warned of a ¥3tn writedown on its listed subsidiary, Japan Post Bank, because of erosion in its market value.

Japan Post managed to raise ¥1.3tn by selling a second tranche of shares in 2017. But it was forced to postpone a third sale of about ¥1tn planned for last year as it battled to repair its image with investors and customers.

Since Toll was acquired by Japan Post, the Australian company’s financial and operational performance has deteriorated rapidly.

In the 12 months to March, the company made a loss of A$685.3m ($487.2m), up from a loss of A$113.8m a year earlier. The company has been hit by lower freight volumes due to weak global economic conditions, bushfires in Australia and Covid-19.

People with direct knowledge of Toll’s operations said the company failed to properly integrate the different systems it inherited following years of rapid growth through acquisition. This year, cyber attacks forced the company to shut a range of its services, causing chaos for customers and employees.

Source: Financial Times

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