Expansion of Japan FDI through Mergers and Acquisitions: Largest Acquisitions by Japan-Based Companies
Austin, TX - (ZPRYME NEWS) - 05/07/08 -Japan is considered as a country with a developed economy that strives to promote foreign direct investments (FDI) through greenfield investments. These are investments primarily to build more factories, research and development facilities.
However, in the economic trend today, according to a study conducted by the US-Japan Business Council Inc. entitled “Expanding FDI in Japan: M&A is the Key” which was published in 2005, greenfield investment is no longer a common method for developed economies. It was the general proposition of the study discovered greenfield investments are not likely to produce substantial investments and that the use of this kind of investment to increase FDI is unrealistic.
The US-Japan Business Council Study, 2005 also exposed that according to OECD, more than 70 percent of the FDI in developed economies come from Mergers and Acquisitions (M&A). M&A are transactions involving the acquisition of a part or the whole ownership of a certain company. In Japan, ever since 1997, 70 percent of its FDIs were done through M&A which are categorized into rescue type M&A, restructuring purpose M&A, deregulation driven M&A, industry consolidation or market integration M&A, and IT-led greenfield investments. However, the same study revealed that the M&A level in Japan are relatively lower as compared to the United States and the European Union. It was revealed that most of the Japanese FDIs in the United States were greenfield investment but since the 1980’s, most of the Japanese companies started to acquire US companies. The study also mentioned that from 1984 to 1989, Japanese companies acquired over 500 US companies and in the 1990’s Japanese acquisitions especially those of US IT companies tremendously increased.
Among the recent and largest acquisitions of Japan-based companies is that of Takeda Pharmaceutical Co. and Eisai Co. Bloomberg.com Japan correspondents Jason Gale and Hiroshi Suzuki in a report titled ‘Takeda, Eisai Takeovers Raise Biotech Cost for Merck, Novartis’, said that these companies spent $500 millions for the acquisitions which was almost five times that of the acquisitions made by all Japanese companies in 2007 for biotechnology. This deal was brought about by the policy of the Japanese government to cut the prices of prescription drugs by 6.7 percent and with failure of companies to produce medicines that would reach sales of $1 billion. Eisai in March 2008 surprised the US and European bidders when it proposed a bid of $325 million for Morphotek Inc. to assist their researches on Alzheimer’s medicines. Also Takeda announced a more than $230 million deal to acquire the UK company Paradigm Therapeutics Ltd. for genetic engineering studies related to cancer, central nervous system diseases and diabetes.
In 2007, amongst the largest acquisitions by Japan-based companies were assisted by Morrison & Foerster, a company often engaged by M&A clients in Japan, Asia and other countries. The company revealed that the largest ever foreign acquisition by a Japanese company is that of the $4.6 billion offer to Citigroup for Nikko Cordial. Other acquisitions facilitated by the company in 2007 were the $780 million acquisition by GCA Holdings of the US-based investment bank Savvian, the $310 million acquisition by TDK of Alps HDD Head Business for the manufacture of hard disk drives heads and its development and commercialization. As well as TDK’s acquisition of 74.3 percent majority interest of Magnecomp which is a Thailand-based hard disk drives magnetic heads maker, the $150 million acquisition by Fujitsu of Spansion Fabrication facilities for semiconductor fabrication, and the $100 acquisition by THK of Rhythm from Carlyle. These acquisitions are but a few of the acquisitions made by Japan-based companies and are clear indications of Japan’s trend to disburse their FDI through mergers and acquisitions.
By
Zpryme: Emerging Markets Group
Journalists interested in more information please contact us at public.relations@zpryme.com