Break-up talk a tall story, says new chief

THE incoming chief executive at Toll Holdings, Brian Kruger, has poured cold water on speculation that the company could be broken up and sold to private equity interests. He has also played down investor fears of the freight and logistics company's exposure to the depressed retail market.

By InvestSMART · 5 Aug 2011

By InvestSMART ·
5 Aug 2011

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The 49-year-old, who is now Toll's chief financial officer, was yesterday announced as the successor to the long-serving Paul Little, who will step down at the end of the year.

Mr Kruger said he would focus on integrating parts within Toll's six divisions to work more closely and cross-sell to customers, rather than contemplate a break-up.

"The company is worth significantly more in the current structure than in a break-up," Mr Kruger told BusinessDay. "A lot of the customers we work with look for services that are provided by different parts of our business."

Mr Kruger's appointment was widely expected but had concerned some in the investment community who had hoped for an external candidate to bring fresh ideas to the company after Mr Little's 26-year reign.

But Mr Kruger, a former BHP Billiton and Bluescope Steel executive, pointed out that he had spent only two years at Toll and had a wide range of financial, operational and mergers and acquisitions experience.

His appointment was met with ringing endorsement from the chairman of Wesfarmers and Boral, Bob Every, who first met him 16 years ago when both were at BHP.

Mr Every, then BHP's chairman, said Mr Kruger demonstrated strong commercial acumen even at that young age, and had earmarked him as a future chief executive.

"I saw Brian as a young finance executive and really liked his style," Mr Every said. "He's hard but fair."

Analysts have voiced concern over Toll's long-term strategy, including its large exposure to the weak retail sector.

"I think to some extent that's been overdone," Mr Kruger said. He said Toll's businesses had a much lower level of exposure to discretionary retailers than analysts thought, and that he would provide more details at the company's full-year results in three weeks.

Mr Kruger also welcomed Mr Little's plans to return to the Toll board as a non-executive director after next year's annual meeting, despite widespread corporate governance concerns from investors.

Mr Little has also stated his ambition to eventually become chairman of Toll.

"I think it's absolutely the right thing for us to not be losing his skills, knowledge and experience," said Mr Kruger, who will be paid $1.7 million a year, plus bonuses.

Toll shares closed down 3? at $4.41.

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Frequently Asked Questions about this Article…

Why has Brian Kruger poured cold water on talk that Toll Holdings will be broken up or sold to private equity?

Brian Kruger, the incoming chief executive at Toll Holdings, has said the business is worth significantly more in its current, integrated structure than in a break‑up. He told BusinessDay that many customers use services from multiple parts of Toll, so breaking the company up or selling to private equity would not deliver the same value to customers or shareholders.

What is Brian Kruger’s strategy for Toll Holdings and how might it affect investors?

Kruger plans to focus on integrating Toll’s six divisions so they work more closely and can cross‑sell services to customers. For investors, that means management is prioritising organic value creation through better coordination and sales across the group rather than divestments or a break‑up.

Should everyday investors worry about Toll’s exposure to the weak retail market?

Analysts have raised concerns about Toll’s exposure to the weak retail sector, but Kruger says that exposure has been overstated and that Toll’s businesses have a much lower level of exposure to discretionary retailers than many believe. He has promised to provide clearer detail at the company’s full‑year results in three weeks.

Who is Brian Kruger and what experience does he bring to Toll Holdings?

Brian Kruger is Toll’s current chief financial officer and the announced successor to long‑serving CEO Paul Little. He is 49, has about two years at Toll, and previously worked at BHP Billiton and Bluescope Steel. Kruger brings financial, operational and mergers & acquisitions experience to the top role.

What did the article say about Paul Little returning to the Toll board and corporate governance concerns?

Paul Little plans to return to the Toll board as a non‑executive director after next year’s annual meeting and has said he ultimately wants to become chairman. Kruger welcomed retaining Little’s skills and experience, though the article notes investors have voiced corporate governance concerns about that move.

How did the market react to the leadership news at Toll Holdings?

According to the article, Toll shares closed at $4.41 following the announcement. The piece also notes that some in the investment community had hoped for an external candidate to bring fresh ideas after Paul Little’s 26‑year reign.

What is Brian Kruger’s reported pay package as incoming Toll chief executive?

The article states Brian Kruger will be paid $1.7 million a year plus bonuses as he succeeds Paul Little as Toll’s chief executive.

What key updates should investors watch for from Toll Holdings in the short term?

Investors should watch Toll’s upcoming full‑year results in three weeks, when Kruger has said he will provide more detail on the company’s exposure to retail and on how integration and cross‑selling across the six divisions will be implemented. Also monitor any statements about Paul Little’s planned non‑executive return and any further market reaction.