Orix Corp., a provider of financial services ranging from leasing to insurance, plans to invest as much as ¥80 billion ($1 billion) in China over two years in water, machinery and renewable energy.
Through private-equity deals, Orix aims to buy stakes in Chinese companies that provide such infrastructure as sewage treatment and solar-power plants, President Makoto Inoue said on Wednesday. The Tokyo-based company plans to buy aircraft and ships to expand leasing services, he said.
Orix is looking to China as growth in Asia’s biggest economy places a strain on the environment and energy resources. Developing nations will need financing of $776 billion a year through 2020 to meet demand for power, water and sanitation, according to the Asian Development Bank Institute.
Inoue, whose company reaped about 40 percent of pretax income from abroad in the year that ended in March, said he will “cautiously” select investment vehicles, given the recent market volatility triggered by Europe’s sovereign debt woes.
Inoue said Orix is looking to invest in water-treatment firms in China’s inland areas. The Japanese company unveiled plans in May to buy a 14.5 percent stake in Hong Kong-based China Water Affairs Group Ltd.
For private-equity business, “our basic strategy is to exit within five years after our initial investment by offering shares or selling stakes,” Inoue, 58, said. “We’d prefer to cash in on short-term projects with a decent rate of return.”
“The overseas investment is favorable and in harmony with the company’s overall strategy,” said Wataru Ohtsuka, an analyst at Nomura Securities Co. in Tokyo.
M&As are accelerating in the global water market.
A group led by Hong Kong billionaire Li Ka-shing’s Cheung Kong Infrastructure Holdings Ltd. this month made a £2.4 billion ($3.9 billion) takeover proposal for Northumbrian Water Group PLC in its second foray into the U.K. in a year. Japanese trading houses including Mitsubishi Corp. and Marubeni Corp. last year clinched buyout deals in Chile and Australia.
In the U.S., Orix will keep its focus on financial institutions as the investment target, Inoue said. Last year, Orix USA Corp. won a deal to buy a majority stake in the holding company of Mariner Investment Group, a New York-based manager of hedge funds valued at $11.7 billion.
“We don’t set a time frame for our investments because a deadline sometimes forces you to rush and buy something you don’t eventually want,” Inoue said. “Whenever we find a target, we’ll get in quickly.”
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