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 Flush with abundant bank funds available at near-zero interest
rates, and bolstered by stock markets at multi-year highs, Japan Inc
is not short of capital to plough into overseas bids in search of
profits that remain stubbornly hard to generate at home.
Japanese corporations have in the past faced criticism for moving
too slowly on the acquisition trail, but Thursday's last-minute bid
by Nikkei to snatch the famous pink-hued newspaper from under the
nose of Germany's Axel Springer <SPRGn.DE> suggests they are getting
better at it.
"Japan corporates are definitely wanting to acquire more. Corporate
profits have risen a lot and with that has come increased confidence
for CEOs to make quick decisions," said Mark Williams, head of
investment banking for Asia ex-Japan at Nomura. "They are far more
receptive to international ideas and we definitely see more deals
coming."
Nikkei's coup was followed on Friday by a bigger deal from life
insurer Meiji Yasudas Life Insurance Co [MEIJY.UL], which agreed to
buy StanCorp Financial Group <SFG.N> for $5 billion.
That deal nudged Japan past China to become Asia's biggest acquiring
nation this year, according to Thomson Reuters data.
After hitting an annual record of $83 billion in 2012, Japanese
outbound activity has slowed, but companies are making a renewed
pushed this year, partly under pressure to improve efficiency.
In 2015, Japanese companies have launched $53.5 billion worth of
deals and are on track for the country's second-best M&A year on
record. In comparison, Chinese companies have announced $50 billion
deals in the same period.
Deals earlier this year have included Japan Post's $5 billion
acquisition of Australia's Toll Holdings and Canon
Inc'spurchase of Swedish video surveillance firm Axis AB.
BLEAK DEMOGRAPHICS
A major driver is that, over the longer term, Japan's demographics
give a bleak prognosis for domestic demand.
The population has been falling for a decade and is projected to
drop from 127 million to 87 million by 2060, 40 percent of whom will
be over 65.
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"It highlights the relentless desire to basically spread their
wings, recognizing that the Japanese economy is a greying one and
the capital that they have has to be put to work elsewhere," one
person familiar with the FT deal said.
Meanwhile, Prime Minister Shinzo Abe's so-called 'Abenomics'
policies, including a program of unprecedented monetary stimulus, is
giving the country's companies easy access to cheap cash.
Japan's new corporate governance code that came into force last
month is putting greater focus on profitability and capital
efficiency, and a successful acquisition is the best way to achieve
it, bankers say.
That is also putting pressure on Japanese companies to deploy their
cash balances, which Goldman Sachs estimated reached 87 trillion yen
($702 billion) in fiscal year 2014.
Bankers are expecting deal flows to pick up as, despite the recent
flurry of activity, still only 7 percent of Japanese corporates cash
deployment was for M&A between 2005 and 2013, while a chunky 57
percent went on capital expenditure, Goldman Sachs said.
"They certainly have a lot of money in the system now. The cost of
funding is very, very low too, but there's not much that you can do
to deploy in Japan," the person who worked on the FT deal added.
(Reporting by Denny Thomas; Additional reproting by Anshuman Daga in
SINGAPORE; Editing by Alex Richardson)
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