Toll expects to join top 30
15 Sep 2005 17:31 AAP
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http://afr.com/articles/2005/09/15/1126750069914.html)
Logistics firm Toll Holdings estimates it can achieve full-year gross synergies of $65 million within three years if its $4.6 billion hostile takeover offer for stevedore Patrick Corp succeeds. Synergies after tax were estimated at $45.5 million.
Toll, which released its bidder's statement for Patrick on Thursday, also said it estimated one-off restructuring costs of $36 million to achieve the estimated gross annual synergies.
The gross synergies of $65 million would come from operational cost savings (including technology systems), administration cost savings and additional earnings from revenue growth.
Toll said the synergies could differ from the estimates due to limited public information available on Patrick.
Toll estimated that the combined group would have a pro forma net profit before non-recurring items of $496 million for 2005/06.
Toll's forecast reported net profit for the combined group is $354 million for the year ending June 30, 2006, based on an acquisition date of January 1, 2006.
Toll said that it expected a standalone net profit after non-recurring items of $250 million under the new AIFRS accounting standards in 2005/06.
It said that if it became entitled to compulsorily acquire all of Patrick's shares it would centralise corporate head office functions and immediately start to review Patrick's operations, which would take about three months. Synergies generated would improve the merged group's capability to supply end-to-end logistics services to customers.
If Toll did not gain full control of Patrick but waived the condition of its bid that it be entitled to acquire all Patrick shares, it would maintain Patrick's listing on the Australian Stock Exchange and seek proportionate representation on the Patrick board.
Toll said it would reduce the merged group's investment in airline Virgin Blue, of which Patrick is the controlling shareholder with 62.4 per cent, to as low as 7.7 per cent.
Toll said it had no expertise to provide to Virgin Blue's passenger airline business.
Toll also intended to enter into talks with Virgin Blue to transfer Toll's air freight requirements to Virgin Blue.
The merged group is expected to have a market capitalisation of about $8.6 billion, making it one of the 30 biggest companies listed on the Australian Stock Exchange.
The transport and logistics group would have annual revenues of more than $7 billion and be in a strong position to fund capital expenditure and participate in regional growth opportunities.
Toll said Patrick was facing significant additional capital reinvestment requirements which, in Toll's view, was likely to place a significant strain on Patrick's prospective returns to shareholders as a standalone company.
"In contrast, the merged group will have a conservative capital structure with low gearing and strong operating cash flows, leaving it in a strong position to fund capital expenditure plans and further regional growth opportunities."
Toll managing director Paul Little said Toll had delivered significantly superior growth in earnings and operating cash flow per share compared with Patrick over the last five years.
One thousand dollars invested in Toll five years ago would now be worth about $5980 today compared with about $1925 for Patrick.
The merged group also would have significantly better structured exposure to the volatile airline industry.
"Both the Toll and Patrick share prices have reacted very positively to the offer," Mr Little said.
"Patrick's market value is now around $850 million higher than before market speculation of a Toll takeover bid for Patrick started in July. This reinforces the positive feedback that we have received from shareholders and customers."
Toll is offering 0.4 of its shares and 75 ¢ for each Patrick share.
Patrick shareholders also will receive an in specie fully franked special dividend from Patrick of 0.3 Virgin Blue shares for each Patrick share. The offer initially valued Patrick at $6.70 per share or about $4.6 billion.