Japan Post is shelling out a nearly 50 percent premium to take over Australian freight player Toll Holdings, spurring concerns the Japanese financial behemoth might be overpaying.
"The offer by Japan Post, inclusive of a control premium, is materially ahead of what we believe is fair value for Toll and its prospects," Anthony Moulder, a transportation analyst at Citigroup, said in a note Wednesday. He recommended shareholders accept the offer.
Toll's prospects certainly appear muted. On Tuesday, the Australian company reported its net profit for the July-to-December half-year fell 22 percent from the year earlier period, with its resources-sector customers taking a hit from commodity price weakness. But government-owned Japan Post is still offering 6.5 billion Australian dollars, or around $5.1 billion, to take over the company.
It's a move that may muddle the Japanese giant's plan for privatization via an initial public offering (IPO), something that's been anticipated for as long as a decade.
"If you make an acquisition before the IPO, it may complicate [the deal] because it must be reflected in the company's accounts. It means more work," Philippe Espinasse, author of IPO: A Global Guide, said. Although he added that a deal could create buzz around the offering, a tactic that worked well for Alibaba, which had transactions in the lead up to its IPO.
Some are openly skeptical about the merits of the deal and its price. "I personally feel Japan Post is maybe paying too much, but they're under pressure," ahead of the expected IPO, Takuji Okubo, chief economist at Japan Macro Advisors, told CNBC.