Australia's Toll Holdings said yesterday it will buy the 49% stake held by its partner China Merchants Group in Shenzhen-based joint venture ST-Anda Logistics, increasing its ownership to 100%. Financial details of the transaction were not disclosed.
"The Toll group has for some time considered our Chinese logistics operations to be of strategic significance to Toll's international business," says Toll group managing director Paul Little in a written statement commenting on the deal. "China is a critical element of our growth strategy."
ST-Anda is a third-party logistics operator in China. It was formed in 1995 as a joint venture between Singapore-based SembCorp Logistics and the Shekou Industrial Zone. The Shenzhen Shekou Industrial Zone is a wholly owned subsidiary of Hong Kong-based China Merchants Group, a conglomerate with interests across logistics, ports, finance and infrastructure. ST-Anda has grown to operate a network of 30 regional distribution centres across more than 1,300 cities in China. Its customers include large multinationals in the consumer space including Colgate Palmolive and Johnson & Johnson.
In 2006, Melbourne-headquartered Toll Holdings, Australia's largest freight company, bought control of SembCorp Logistics at a cost of S$1.4 billion ($949 million) and delisted the company. It first acquired SembCorp's 60% holding and then made an open offer for the minority shares outstanding. At the time, Toll said the acquisition gave it a footprint in 15 countries across Asia. Toll acquired ownership of 51% of the ST-Anda joint venture as part of the deal with SembCorp.
The acquisition of the remaining 49% of ST-Anda that Toll announced yesterday is subject to regulatory approval in China, which is expected to take up to six months.
Toll has been aggressively growing through acquisitions. The deal in China follows only days after Toll announced it is acquiring a 40% equity stake in BIC Logistics, which provides road, rail and air transport across India. Toll has the option to increase its stake to a majority holding over the next two years.
And in April, Toll completed the acquisition of Hong Kong-listed BALTrans at an outlay of A$365 million ($270 million). BALTrans is a freight forwarding company with annual revenues of A$690 million.
Toll's focus on growing its business in Asia through acquisitions is paying off, evidenced by its results for the six months to December 2008, which it announced in February. The revenue growth in Australia over the period was only 4%, while in Asia it was almost double at 7.8%. Margins in Asia, at 11% for the six months, were also higher than margins in Australia, which were maintained at 8%. Toll said that the lower growth rate in Australia reflected a slowdown in economic activity and that acquisitions outside the country had improved the overall picture.
Toll 's shares gained 1% to A$6.36 on the Australian Securities Exchange yesterday.