Softbank-Sprint deal latest in Japan Inc. shopping spree

Posted at 10/17/2012 3:47 PM

TOKYO - Softbank's $20 billion takeover of mobile carrier Sprint Nextel is the latest big-ticket buy in Japan Inc.'s overseas shopping bonanza, a boom driven by a strong yen and a flaccid market at home.

Japanese companies, which earned a reputation as takeover titans during the 1980s, are again notching up eye-popping deals in everything from pharmaceuticals to advertising, and are on track to breach last year's record tally of $84 billion in overseas deals.

Japan's slowing economy and rapidly ageing population, sagging exports to debt-battered Europe, and a strong yen which hit record highs around 75 to the dollar late last year, are all helping to push the trend.

While the continuing strength of the Japanese currency has triggered anguish among exporters who face the erosion of repatriated profits and cost pressures in producing at home, it has also given firms muscle to buy overseas targets.

Currency traders have increasingly turned to the yen as a safe haven amid the lingering European sovereign debt crisis and an uncertain US recovery.

"The strong yen, the maturity of the domestic economy and low interest rates are the three key factors behind the recent launches by Japanese firms overseas," said Naoki Fujiwara at Shinkin Asset Management in Tokyo.

"This trend is likely to continue... Food companies and retailers are the next possible sectors looking to go abroad," he added.

Softbank's announcement Monday that it will buy 70 percent of the third-biggest US mobile carrier was Japan's biggest-ever overseas deal after Japan Tobacco's $19 billion purchase of Britain's Gallaher Group Plc in 2007.

Japan Inc. has notched up about $66 billion in overseas acquisitions so far this year, not including the Softbank takeover, putting it on track to blow past last year's record of $84 billion, according to data provider Dealogic.

That compares with a total of about $36 billion in 2010 and $24 billion in 2007, according to its figures.

Headline-grabbing deals in the past couple of years have included Takeda Pharmaceutical's 9.6 billion euro ($12.5 billion) purchase of Swiss drugmaker Nycomed and Sumitomo Mitsui Financial's deal to buy the Royal Bank of Scotland's aircraft leasing arm for about $7.3 billion.

Trading house Mitsubishi Corp. earlier this year announced a $6.1 billion multi-year investment in Canadian shale gas assets, while advertising giant Dentsu said it would buy Britain-based Aegis for about $5.0 billion.

But the ramped-up shopping spree also carries a more desperate tone, with the move a key to survival for some Japanese firms amid dwindling exports and little room for big gains at home.

"Japanese firms have to go abroad to survive in the global market," said Toshihiro Nagahama, chief economist at Dai-ichi Life Research Institute.

"Mergers and acquisitions are a good tool to expand businesses quickly in rapidly growing foreign markets. Japanese firms have been slower in this area compared to other" rich nations, he added.

The buying has echoes of the late 1980s boom years, when Japanese firms scooped up familiar assets ranging from the Rockefeller Center and other prime New York properties to Universal Studios and Columbia Records.

Many of the acquisitions ended badly and Japan came to be be seen as a financial predator.

However last year's quake-tsunami disaster, which pounded Japan's economy and forced many manufacturers to temporarily shutter their operations, may have changed the mindset of Japanese executives.

And few think the yen will keep up its blistering pace in the long-term.

"Not a small number of Japanese firms are seriously considering diversifying their business base to spread risks," said Takahiro Sekido, strategist at the Bank of Tokyo-Mitsubishi UFJ.

"For them, going abroad is a realistic option. Also, since there is speculation that the current levels of the dollar-yen are near the bottom, companies and investors are rushing to take action now."

© 1994-2012 Agence France-Presse