Tue, Jul 09, 2013 - Page 15 News List

Japan mergers decrease as yen volatility surges

Bloomberg

Japanese companies made the fewest acquisitions in a decade during the first half as the yen’s volatility climbed to a four-year high, cooling buying interest.

The number of deals announced in the first half of the year was 997, with a total value of US$45.7 billion, according to data compiled by Bloomberg.

That is the lowest number of deals and value since the first six months of 2004. Total deal value is 47 percent lower from the first half of last year.

Since Japanese Prime Minister Shinzo Abe swept into power in December last year on promises to resurrect the economy by expanding stimulus measures and weakening the yen, the Japanese currency has whipsawed between ¥82.36 and ¥103.21 to the US dollar. The yen’s 100-day volatility rose to 14.81 points this month, the highest since August 2009, and more than double the 6.97 figure at the start of the year.

ASSUMPTIONS

“Companies had set their budgets for the year as of April and May under certain assumptions, but they’re not sure they will hold,” said Nobuhisa Ishizuka, a Tokyo-based partner specializing in mergers at Skadden, Arps, Slate, Meagher & Flom LLP. “This makes it difficult for a lot of them to pull the trigger.”

Marubeni Corp, Japan’s sixth-most acquisitive company in the last five years, last month cut the size of its purchase to buy US grain trader Gavilon Group LLC by US$1 billion from the US$3.6 billion announced in May last year by excluding the energy unit from the final agreement.

The trader said on Saturday that it paid US$2.7 billion for Gavilon in the end because of a “purchase price adjustment,” without providing details.

Masami Iijima, chief executive officer of Mitsui & Co, Japan’s most acquisitive company in the last five years, in May said the trading house does not plan any major acquisitions that are “significant in size.”

COOLED DEMAND

The Tokyo-based trader will focus on expanding existing assets as slowing Chinese economic growth cooled demand for commodities, Iijima said.

The total number of domestic and overseas acquisitions announced by Japanese companies in the first six months of last year was 1,167, the data show. The total deal value was US$85.5 billion, according to the data.

Overseas mergers and acquisitions by Japanese firms fell to US$10.6 billion this year from a record US$112 billion for all of last year, the data showed.

Mitsubishi Corp, the nation’s biggest trading house, announced the most deals in the first six months with 12, data show.

The biggest transaction proposed was the US$3.25 billion merger of the thermal power units of Hitachi Ltd and Mitsubishi Heavy Industries Ltd.

Japanese acquisitions abroad will recover in the second half as companies make adjustments to cope with the weaker yen, said Yuichi Jimbo, head of investment banking at Citigroup Global Markets Japan Inc in Tokyo.

The bank has some deals that may be announced before year-end, he said last month.

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