In what could be one of the biggest takeover deal agreements recently, shipping and logistics giant Toll Holdings Limited (ASX: TOL) is reported to have accepted the buyout bid of Japan Post, Japan's public postal company.
According to reports in the Fairfax media, Japan Post wants to expand its operations throughout Asia and Toll Holdings with an extensive global network for logistics and freight forwarding would fit the bill. The giant postal company, which had annual revenue of US$152.1 billion in financial year 2014, is said to have approached Toll Holdings in January.
After a two-week due diligence period, Japan Post made its offer of around $5 billion. Breaking it down, the deal would pay $9.04 a share plus the interim dividend of 13 cents per share. Based on yesterday's $6.08 close, Toll shareholders are potentially looking at a whopping 50.8% premium.
Today, Toll Holdings will be releasing its half-year results and will speak to the media this morning at 10am in Sydney. The board said that it will recommend the takeover offer to shareholders.
Toll Holdings stock has risen 3.2% since 31 December, whereas the S&P/ASX 200 Index (ASX: XJO) (Index: ^AXJO) is up 8.3% over the same period. Trading volumes for the logistic company's shares were average leading up to today, suggesting the takeover offer has surprised the market.
The deal will have to be approved by shareholder vote and most likely the Foreign Investment Review Board (FIRB) will also be looking over the market and industry ramifications of such a buyout. Toll Holdings is the largest shipping and logistics company in Australia and a leading integrated logistics provider in the Asia Pacific region.
For investors, if you already have Toll Holdings in your portfolio, it may be time to break out the champagne. For those not so fortunate, it is hard to say if any higher bid will come since the board is already in approval mode. I would expect Toll Holdings stock to jump up to the bid price premium once the ASX opens.
Regularly, once a takeover is publicly announced, there are opportunities to jump aboard. If this offer brings out offers from other takeover suitors, new investors stand a chance to get a good short-term gain if a bidding war starts.
However, this one may be a done deal from the start. If there are following complications, like the FIRB blocking the deal, as it did for the Archer Daniels Midland takeover bid for Graincorp Ltd (ASX: GNC) in 2013, then other companies could enter or the whole deal could be lost.
That's why it pays to own quality stocks of market-leading companies. They can command a premium if a takeover offer comes their way. Watch this stock closely in case there is a chance for an improved or competing offer.
