“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. in Tokyo. “It leaves companies no choice but to look for growth overseas.”
Companies in Asia’s second-largest economy have announced $63.4 billion of acquisitions abroad in 2012, data compiled by Bloomberg show. The biggest deal this year before today was Marubeni Corp.’s takeover of Gavilon Group LLC, valued at $5.6 billion including assumed debt.
Softbank President Masayoshi Son said the purchase will make his company the world’s third-largest wireless carrier by revenue. Rakuten, Japan’s biggest Internet retailer, plans to expand in India and Australia amid the outlook for slowing domestic economic growth, Chief Executive Officer Hiroshi Mikitani said in an interview last week.
Rakuten aims to have 70 percent of sales transactions overseas by as early as 2020, said Mikitani, 47, Japan’s third-richest man. 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., according to data compiled by Bloomberg.
“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.”
Two decades of economic malaise and on-off deflation add to the urgency. The Bank of Japan downgraded its assessment of Japan’s economy for a second month on Oct. 5, saying “economic activity is leveling off.” “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.”
Chinese companies have announced $61 billion of overseas acquisitions so far in 2012, data compiled by Bloomberg show, putting them just behind the pace of their Japanese peers. Cnooc Ltd.’s $15.1 billion takeover of Nexen Inc., announced in July, would be the nation’s largest deal abroad if successful, according to the data.
Fast Retailing Co. (9983), the owner of the Uniqlo clothing brand, on Oct. 12 forecast annual profit that missed analysts’ estimates. The retailer is expanding overseas to counter lower- than-expected domestic demand and plans to open 1,000 outlets in North America and Europe by 2020. Japanese retailers and beverage companies will continue to make acquisitions overseas, said Nicholas Smith, a Japan strategist at CLSA Asia-Pacific Markets Ltd. in Tokyo.
Kirin, Japan’s largest brewer by market value, agreed to buy out shareholders in Brazil’s Schincariol Participacoes e Representacoes in November 2011, valuing the brewer at about $3.6 billion excluding debt. “For a lot of them that ruled the roost at home, there are huge scale merits for moving overseas and selling the same stuff,” Smith said.(Jonathan Browning and Philip Lagerkranser for Bloomberg)