Toll Group

(In the first of a three-part series, Aaron Patrick reports on corruption in logistics group Toll, including bikie gangs that used it to transport drugs.)

The Australian Financial Review reports:

As the summer of 2015 drew to a close, Brian Kruger was ensconced in his seventh-floor office on Melbourne’s busy St Kilda Road preparing for the worst day of his life.

On February 18, the Toll Holdings managing director knew he would be forced to reveal that one of the greatest success stories of Australian business had come to an end.

The logistics company, which had grown from a single horse and cart in Newcastle 127 years earlier to an $8 billion-revenue global behemoth, was going to issue a profit warning so severe it could likely breach the covenants on its $1.5 billion debt.

While the company looked profitable, it wasn’t generating cash, according to a former senior executive. The share price was going to collapse, and it was possible Toll’s banks would step in and take control.

On the morning of Toll’s first-half profit results for the 2016 financial year, Kruger got the break of a lifetime. Negotiations with Japan Post, which was under pressure to expand internally, had accelerated in the previous two days.

Executives from one of the world’s largest companies had arrived in Melbourne overnight and agreed to buy the Australian company for $6.5 billion cash, 49 per cent above its market capitalisation.

“We couldn’t believe our luck,” a former senior Toll manager says.

A Toll spokeswoman disputes that the company was about to issue a profit downgrade, which was alleged by three of the former executives. “Any cursory review of the easily accessible public information shows that assertion is factually incorrect and a nonsense,” she says.

The last-minute sale in 2015 created 80 millionaires among Toll employees and a $325 million payday for legendary co-founder Paul Little.

For Japan Post, which was briefed by Toll in advance about the profit downgrade, the acquisition turned out to be a disaster. Toll was riven by internal conflict and weak governance controls, was in financial decline and suffered from corruption.

Eight former Toll executives have agreed to describe, for the first time, the inner workings of the company for a three-part Australian Financial Review series. All held leadership positions or worked with the company’s top executives. They asked that their identities be kept secret to protect themselves from professional recriminations. Most say they have been scarred personally by their experience.

To read the full post, please click here.

The follow-up story (two of three) is here: “Former execs say Toll was all tactics, no strategy“… later amended as follows: “Toll ‘warlords’ all tactics, no strategy“.

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