Japan Inc. nears record year of overseas M&As

Bloomberg

Softbank Corp.’s bid for control of Sprint Nextel Corp. is adding to evidence that Japan Inc.’s overseas buying spree isn’t about to abate.

Softbank, Japan’s third-largest wireless carrier, said Monday it agreed to pay $20.1 billion to acquire about a 70 percent stake in Sprint. That would make it the country’s biggest outbound acquisition on record.

The Sprint deal brings takeovers abroad close to the record $88 billion Japanese companies notched last year, showing how a strong yen and weak domestic demand are combining to stoke acquisitions.

Rakuten Inc. and Kirin Holdings Co. are among companies turning to deals in faster-growing markets as they confront deflation and the aging population at home.

“The trend is likely to continue, especially without the government taking steps to resolve the aging population, and with the yen looking like it won’t weaken anytime soon,” said Naoki Fujiwara, who helps oversee $6.7 billion at Shinkin Asset Management Co. “It leaves companies no choice but to look for growth overseas.”

Companies in Japan have announced $63.4 billion of acquisitions abroad in 2012, data compiled by Bloomberg show.

The biggest deal this year before Monday was Marubeni Corp.’s takeover of Gavilon Group LLC, valued at $5.6 billion including assumed debt.

At $20 billion, a deal by Softbank for the third-biggest U.S. wireless carrier would exceed Japan Tobacco Inc.’s $19.02 billion acquisition of the U.K.’s Gallaher Group Ltd. in 2007. The deal involves the purchase of $12.1 billion of Sprint shares from other holders and $8 billion of new capital Softbank said.

Softbank President Masayoshi Son said the purchase will make his company the world’s third-largest wireless carrier by revenue.

Rakuten plans to expand in India and Australia amid the outlook for slowing domestic economic growth, Chief Executive Officer Hiroshi Mikitani said. Rakuten aims to have 70 percent of sales transactions overseas by as early as 2020, he said.

The retailer, which in the past three years announced more than $1.6 billion worth of purchases, had $10 billion in cash and short-term investments as of June 30, about double the amount for U.S. rival Amazon.com Inc.

Supporting the ambitions for growth, the yen has appreciated 3.7 percent over the past six months, the best performance among the 10 developed-nation currencies tracked by Bloomberg Correlation-Weighted Indexes.

“The strength of their currency is probably one of the biggest factors driving their ability and desire to do these outbound deals,” said Jon Parker, a partner in transaction services at KPMG LLP in Hong Kong. “For Japan it ends up being more general and opportunistic.”

“Japan’s economy is suffering from very limited growth so exporting capital is a form of growth for them,” said Lawrence Chia, the Beijing-based Asia-Pacific head of financial advisory services at Deloitte Touche Tohmatsu. “What has driven that surge is the yen.”

The economic woes mean Japanese companies have greater need for acquisitions than Chinese firms, which are mainly seeking targets in resources and energy, Chia said.