Thursday, April 21, 2016

JAPAN POST LOOKING FOR MORE ACQUISITIONS

Japan Post Holdings Sets Its Sights on More Acquisitions

CEO Masatsugu Nagato says he will consider both domestic and overseas deals in logistics and parcel delivery


Japan Post Holdings CEO Masatsugu Nagato, shown earlier this year. ENLARGE
Japan Post Holdings CEO Masatsugu Nagato, shown earlier this year. Photo: Reuters
TOKYO—A year after its $5 billion acquisition of Australia’s Toll Holdings Ltd., Japan Post Holdings Co. 6178 0.91 % is still seeking big deals to help it expand its logistics business globally, its new chief executive said.
“Stamps won’t generate profits and delivery services are getting even more competitive so mergers and acquisitions or alliances with others seems to be the only way to boost revenue,” said Masatsugu Nagato, who was appointed last month to succeed 80-year-old Taizo Nishimuro .
Mr. Nagato, who served as president of Japan Post Bank Co. 7182 -0.57 % before taking on his current role, said in an interview that he would consider both domestic and international deals in logistics and parcel delivery.
The purchase of logistics company Toll Holdings was the first major acquisition for the government-owned behemoth, which runs 24,000 post offices across Japan, as well as the country’s largest bank by deposits and one of its biggest insurance companies. The deal vaulted Japan Post to No. 5 globally in logistics revenue at the time.
Japanese companies have been looking for acquisition opportunities or alliances overseas to offset weakness at home, where the population is shrinking and demand is weakening. At home, Japan Post Co. ranks third by number of parcels handled, after Yamato Transport Co. 9064 2.09 % and Sagawa Express Co.
“We are not done yet with deal-making and will try to put the pieces together to complete the picture,” he said.
Japan Post Bank, which together with Japan Post Insurance Co. 7181 1.07 % generates about 80% of group profit, sped up plans to invest its $1.6 trillion of deposits more aggressively after the Bank of Japan’s introduction of negative interest rates this year, said Mr. Nagato, a former executive at what is now Mizuho Bank and later chairman of Citibank Japan.
“We’ll do investments in private-equity funds, infrastructure, overseas real-estate investment trusts,” he said.
The BOJ’s move has pushed interest rates lower across the board, making it difficult for banks and other financial companies to maintain profit levels.
Japan Post Bank, which is forbidden from lending money because it is government-owned, has about 40% of its assets invested in Japanese government bonds.
Stamps won’t generate profits and delivery services are getting even more competitive.
—Japan Post Holdings Chief Executive Masatsugu Nagato
“Under the current low-interest-rate environment, any investment has been hit and everyone has some [negative] impact from [negative rates]. We’ll ramp up investments in different areas,” Mr. Nagato said.
The bank said in its midterm business plan released in April last year that it would increase its investments in higher-yielding assets such as foreign bonds and stocks by 30% over the next three years to ¥60 trillion ($546 billion).
According to Mr. Nagato, the bank achieved that target by the end of last year.
Write to Atsuko Fukase at atsuko.fukase@wsj.com