Japan Post President comments on “careless” Toll takeover

In an interview with The Nikkei Review’s Fumito Akiyama, Japan Post Holdings President Masatsugu Nagato noted that avoidable mistakes were made when acquiring Toll Group in 2015, adding that the first step in Japan Post’s future strategy for the Australian logistics company will involve spending cuts.
“I believe we did make appropriate efforts to integrate operations after the Toll purchase, but it is true that we probably left too much up to the local staff,” he said. “From around the summer of 2016, we started re-examining the Toll operations, realising we had to do something.
“I have no intention of bad-mouthing my predecessor [Taizo Nishimuro], but buying the business for ¥620 billion ($7.5 billion) with goodwill of ¥ 500 billion ($6 billion) from day one is careless. I wonder why management could not think it through more. With more effort, a slowdown in the Australian economy could have been predicted, given that commodity prices had been falling.”
The next step for Toll will be a decrease in spending, he shared. “First, we should cut Toll’s spending to build a lean organisation,” he said. “It is like taking one step back to advance two steps forward. We are contracting now to prepare for a leap forward.”
Nagato added that there will be further acquisitions in Japan Post’s future, though the company will approach them with more caution.
“When I think of the postal services 10 years from now, I feel we have to acquire businesses and take other steps,” he said. “Currently, the postal business generates ¥3 trillion ($36 billion) in revenue and spends ¥3 trillion – we have to either increase revenue or reduce spending.
“The postal business is [going] to decline gradually over the long term, so if we can buy a good company for a good price, we would love to. But it is not easy to make an acquisition a success.
“What’s important in mergers and acquisitions (M&As) is not to pay a top price, and to have solid confidence about running the newly acquired business. Good companies have high stock prices, too. Right now, good deals are not out there. We had said we should go after M&As as opportunities arise, but we should tone that down.”