Mizuho Financial Group Inc. will join two U.S. banks in partly financing a $66 billion acquisition in the U.S. pharmaceutical industry, its president said recently, describing the move as the banking group’s leap into the deal business.
Mizuho, Japan’s second-largest lender by assets, will extend a $45 billion bridge loan together with JPMorgan Chase & Co. and Wells Fargo & Co. to help the purchase by specialty pharmaceutical company Actavis PLC of its peer Alergan Inc.
Mizuho is set to provide about ¥1.8 trillion ($14.8 billion).
“This is a huge deal that represents (Mizuho’s) successful overseas strategy,” President Yasuhiro Sato said in an interview Wednesday.
As part of its strategy to expand business abroad, Mizuho has selected 50 blue-chip clients in each of four regions in the world — the Americas, Europe, East Asia as well as the rest of Asia and Oceania — trying to strengthen its ties with the companies.
The Actavis deal is widely seen as a rare case where a Japanese lender has been called on by U.S. banks to help create a huge U.S. acquisition bridge loan, rather than taking part in the financing arrangement after it was already set by the partners.
Experts say such an early entry into the deal will bring Mizuho higher fees than otherwise.
Actavis is expected to eventually roll over most of the loan into longer-term financing such as corporate bonds or equity, and Sato said Mizuho looks to underwrite those securities through its group firms.
“The appeal of this strategy is that we can generate profit in cooperation with our brokerage or trust bank affiliates, in addition to (gains from) the lending,” he said.
Mizuho’s aggressive approach toward overseas markets, however, reflects its concern about less profitability in the domestic market.
Japanese lenders have suffered shrinking profit margins on lending, given low interest rates amid ultraloose monetary conditions created by the Bank of Japan. They have also suffered declines in sales of investment trusts to individual investors in reaction to the previous year’s surge.
Mizuho logged a 17 percent fall in group net profit to ¥355.29 billion for the first half of fiscal 2014 ended in September, as the boost from Prime Minister Shinzo Abe’s economic revival plan, particularly for stock markets, faded.
Sato maintained Mizuho’s position that Japan is its main market.
“We keep our attention on this key market and want to respond to challenges resulting from Japan’s industrial structure and other national issues,” he said.
But Sato also expressed concern about Japan’s economic outlook, saying that the recent sharp fall of the yen, which has lifted energy and other import prices, has forced Mizuho to be watchful of its corporate borrowers.
“There are some companies struck hard,” he said, referring to the impact on smaller businesses in particular.
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