Toll Holdings Limited - Essay Example

Toll Holdings Limited Introduction Toll Holdings Limited is the largest transport company in Australia headquartered at Melbourne. The company has spread its operations across 55 countries in sectors like road, rail, sea, and air (About Toll). The company has long years’ history in the transport sector. This paper will describe the history of Toll Holdings in detail by giving a particular focus to the firm’s notable achievements as well as potential obstacles. Toll Holdings’ background information Generally, Toll Holdings provides integrated logistics solutions to customers in order to meet their overall distribution chain needs. Toll manages a holding company’s administrative affairs and offers management services to its subsidiaries. The company also assists the board with financial support and control services. The major function of Toll Holdings is to supervise the whole group and its legal structure, financial and equity structures, and tax planning activities. In addition, the organization also deals with other activities including policy making, strategic planning, and marketing, recruiting personnel for senior management positions, approving investment proposals and budgets, and making ongoing evaluation of the group’s overall performance. Toll Holdings is one of the leading providers of integrated logistics services in the Asian region. Some of the principle activities of the company include freight forwarding services, temperature controlled transport service, container storage, warehousing and distribution, vehicle transport and distribution, wharf cartage, large scale liquid transportation, and contract distribution services (Toll Holdings Limited). History of Toll Holdings Toll was founded by Albert Toll in Newcastle in 1888. For a long period after the foundation, the company mainly engaged in the transport of goods, especially coal, using horse and cart. Toll was sold to National Mineral Limited following the death of its founder, Albert Toll. Over the 1960, the company transported goods for diversified mining and manufacturing activities and hence the organization became the part of Peko Wallsend Group (Bidder’s statement). After two decades, the company was renamed as Toll Transport in 1985. In the next year, a management buyout team under the leadership of Paul Little and Peter Rowsthorn took over the Toll Transport. This management buyout can be considered as a milestone in the corporate history of Toll Holdings because the company grew dramatically since this buyout. Many of the innovative ideas put forward by Little and Rowsthorn benefited Toll to obtain a competitive edge over its market rivals. In the words of Toll Group Chairman Ray Horsburgh (as cited in McNamara, n. d.), Paul Little has played a key role in driving the company to the global leadership position it enjoys today. In 1986, the company was registered on the Australian Securities and Investments Commission (ASIC) (Half-year financial report 1999). Subsequently, the organisation was listed on the Australian Stock Exchange in 1993 as a public company. Toll’s management considered acquisition as a principal strategy to enhance market expansion. In 1994, Toll Transport expanded its market operations through the acquisition of a number of Australian transport companies, including divisions of Brambles and JN Transport. Those acquisitions greatly assisted the company to increase its market share as well as competitive strengths and capabilities. The major advantage Toll Holdings obtained from these acquisitions is that the organisation could develop a larger and loyal customer base without extensive promotional activities. In addition, increased market power and effective prevention of new entrants are other competitive features of those acquisitions. Toll Transport further improved its market position through the acquisition of TNT Logistics in 1997 and purchased another firm called Interstate Parcel Express Company in the following year. On the strength of a series of such acquisitions, the company built a strong market position by the late 1990s. By the end of the 20th century, the company’s sales volume grew dramatically and the firm experienced 52% increase in sales in 1999 (Toll today). This rapid growth in sales benefited Toll to obtain major contracts with the Coca Cola distributors. To illustrate, Toll Holdings won some major contracts with Coca Cola in China (Toll Group Media release 2009). Since Toll was declared as a public company, the organization achieved an increase in earnings per share by over 220%. As a result, the company’s total dividends paid also increased over the last few years. In 2001, the company acquired Finemore Holdings before the acquisition of two more Western Australian companies namely Autotrans Car Transport and Wesfarmers Transport. Finemore Holdings has been struggling with operational as well as financial difficulties before this acquisition. However, Finemore achieved a new momentum through this acquisition and synergies benefited the company to eliminate issues related to uncertainty (Media release 2011). The organisation entered a partnership contract with Patrick Corporation in 2002 for the Pacific National rail (Williams et al 2005). The Pacific National project was one of the notable achievements in the history of Toll Holdings as this project greatly added to the firm’s market reputation. As part of the Pacific National project, the company acquired some other firms including Tranz Rail (New Zealand rail and trucking group) and TasRail (Tasmanian rail operator). The 2005-10 periods witnessed a series of corporate acquisitions by Toll Holdings. According to the Toll group’s corporate profile, the major firms acquired during this period are JD Lyons trucking company, United Carriers, Express Logistics Group (New Zealand), SembCorp Logistics (Singapore), Patrick Corporation, Gluck, Extra Transport, Perkins Shipping (Australia), BIC Logistics (India), ST-Anda Logistics (China), Summit Logistics International (United States), WT Sea Air Group, and Genesis Forwarding Group (United Kingdom). The takeover of Singapore’s SembCorp Logistics greatly benefited Toll Holdings to expand further. Referring to Toll business policies, rapid enlargement of resources and huge fund generation are the most potential advantages of the business acquisition strategy. During 2005-2007 periods, Toll faced many operational challenges as a result of its attempt to take over Patrick Corporation. Toll and Patrick directors used their meetings for the joined Pacific National rail project as a platform for slanging matches. Toll Holdings involved in a series of court cases during this period. After a number of lawsuits and long legal proceedings, Toll completed the Patrick takeover in May 2006 successfully. Through this acquisition, Toll became the world’s fourth largest transport company with expected annual revenues of over 8 billion (Toll triumphs 2006). After some legal wars, the company also achieved permission to retain Pacific National’s complete ownership. However, the company faced many ethical dilemmas in the integration of Patrick Corporation with the Toll Holdings because Patrick’s directors were resistant to this takeover. In order to avoid such ethical conflicts, the company was forced to maintain separate boards and managements for these two business houses and handle all contracts between them based on the arm’s length principle. As the company chose acquisition as its major business expansion strategy, the firm faced many obstacles and challenges over the last two decades. Despite such operational difficulties, the company achieved a leading position in the global freight transport industry. Toll Holdings achieved A$8.7 billion in sales revenues and A$70.9 million in net income for the fiscal year ending June 2012 (Media release 2010). Conclusion From the above discussion, it is obvious that Toll began to grow dramatically after its takeover by the National Minerals Limited in 1960. The company adopted acquisition strategy to enhance its international expansion and thereby improve total industry share. Since its declaration as a public company, Toll Holdings began to grow dramatically in the global logistics industry, particularly in the domestic market. Although the company’s Patrick takeover decision caused many operational challenges and ethical conflicts, the company managed to complete the acquisition successfully and still remains to be the largest transport company in Australia. References About Toll Global Logistics - Customised Solutions. [Online] Available at http://www.tollin2store.com/about.html [Accessed 1 Oct 2012] Bidder’s statement. Toll Holdings Limitted. [Online] Available at http://www.tollgroup.com/media/Toll%20-%20Bidders%20Statement.pdf [Accessed 1 Oct 2012]. Half-year financial report 1999. Toll Holdings Limited. [Online] Available at http://www.tollgroup.com/investor/halfyear/docs/Toll_31Dec99_HalfYear.pdf [Accessed 1 Oct 2012]. McNamara, M. (n. d.). Big resignation from Toll Holding’s Paul Little. [Online] Available at http://www.businessreviewaustralia.com/sectors/big-resignation-toll-holdings-paul-little [Accessed 1 Oct 2012]. Media release. 2011. [Online] Available at http://www.tollgroup.com/media_release050901-1.html [Accessed 1 Oct 2012]. Toll Holdings Limited. Worldwide company profile. [Online] Available at http://listofcompanies.co.in/toll-holdings-limited/ [Accessed 1 Oct 2012] Toll today. Winning the longest drive. [Online] Available at http://www.tollgroup.com/TollToday/SpringToll99.pdf [Accessed 1 Oct 2012]. Toll Group Media release. 2009. [Online] Available at http://www.tollgroup.com/media/2009/755326.pdf [Accessed 1 Oct 2012]. Toll group corporate profile. [Online] Available at http://www.tollgroup.com/PDF/Acquisitions_2011Aug29.pdf [Accessed 1 Oct 2012]. Toll triumphs. 2006. The Age. [Online] Available at http://www.theage.com.au/news/business/toll-triumphs/2006/04/14/1144521508151.html [Accessed 1 Oct 2012]. Toll Group media release. 2010. [Online] Available at http://www.tollgroup.com/media/2010/863358.pdf [Accessed 1 Oct 2012]. Williams, R., Greig, D & Wallis, I. 2005. Results of Railway Privatization in Australia and New Zealand. The World Bank Group. [Online] Available at http://siteresources.worldbank.org/INTTRANSPORT/Resources/336291-1227561426235/5611053-1229359963828/tp-7_AustraliaNZ-rail_concessions_web.pdf [Accessed 1 Oct 2012]. Read More