Strong Yen Sends Japan Inc on Overseas Buying Spree
The number of overseas acquisitions by Japanese companies jumped 30 percent during the first eight months of this year, according to data compiled by Tokyo-based Recof Corp., which advises corporations on acquisitions.
The total value of overseas takeovers and acquisitions by Japanese companies from January through August more than doubled from a year ago to $46.7 billion, according to data from Dealogic.
The biggest growth was seen in Asia, where the number of deals soared 50 percent year-on-year to 143, a new record for the region. In terms of purchase prices, however, the biggest deals were done in the U.S., according to Recof.
The single biggest Japanese takeover announced recently, however, was Takeda Pharmaceutical’s acquisition of Switzerland’s Nycomed for $13.6 billion.
In another major deal Tomy bought RC2, the U.S. maker of Chuggington and Thomas & Friends toys in an all-cash deal valued at $640 million.
Online securities company Monex Group bought Florida-based TradeStation Group forup to $411 million.
Kirin and Asahi have also bought foreign brewers.
Rakuten sees the robust yen as the key to realizing its ambition of becoming the world’s leading e-commerce company.
In September Rakuten announced a pact to buy British e-commerce site Play.com for 25 million pounds ($43 million), after buying PriceMinister of France and Germany’s Tradoria.
Rakuten’s e-commerce empire has expanded to 10 countries. Its subsidiaries bow include Buy.com of the U.S. and a partnership with Baidu in China as well as ventures in Thailand, Russia, Taiwan and Indonesia. Rakuten grossed 90.7 billion yen ($1.2 billion) in April-June sales, a quarterly record.
For Rakuten the yen’s post World War II highs have been a boon for its efforts to catch up with global e-commerce giants like Amazon and eBay. The yen is up nearly 8 percent against the U.S. dollar over the past year. That makes it easier to buy more companies, said Rakuten CEO Hiroshi Mikitani.
One reason for Rakuten to embrace a high yen is the fact that it makes employee compensation cheaper. Three quarters of the company’s new hires this month are foreigners. Mikitani even delivered his welcoming pep talk in English, Rakuten’s standard language.
A shrinking Japanese population and high labor costs are making overseas growth even more crucial for Japanese companies.
The days when a big Japanese corporation could prosper just by catering to customers in Japan are long gone, said Kevin M. Carroll, who runs EA International, an environmental engineering and consultancy company in Tokyo.
The yen’s strength has also driven Japanese firms to invest in more overseas manufacturing facilities.
In September Honda announced a $50 million investment to boost transmission production in the U.S. The firm’s total capital investment in Ohio will rise to more than $400 million for this year.
Like other Japanese automakers Honda has been hit hard by the strong yen. The yen’s rise erased 22.5 billion yen ($288 million) from its April-June operating profit. Honda had based its business plans on the dollar trading at 80 yen this fiscal year through March 2012 but tyhe dollar is now at around 76 yen, making most cars made in Japan too expensive to sell at a profit overseas. This has forced Honda even to delay model launches until it can cut costs by shifting production overseas.