Japan's Big Banks Step Up Foreign M&A Lending
December 29 2015 - 8:20AM
Dow Jones News
TOKYO—Faced with sluggish domestic growth, Japan's megabanks are
expanding their role in financing global mergers and acquisitions,
which hit a record level this year.
Japanese banks have long ranked among the world's top
cross-border lenders, and have lent many billions of dollars to
Japanese companies also seeking growth abroad through acquisitions.
Now the banks are increasingly financing deals that don't involve
their compatriot companies.
Banks in Japan have had a hand in 59% of global M&A loan
packages this year, up from 46% last year and a longtime high,
according to data provider Dealogic. That means they have
contributed at least a piece of $473 billion worth of global
M&A financing such as syndicated loans, the data show.
Japanese lenders have helped finance some of the year's biggest
deals. They included Anheuser-Busch InBev's $104 billion
acquisition of SABMiller, announced in October. The country's top
three banks—Mitsubishi UFJ Financial Group Inc., Mizuho Financial
Group and Sumitomo Mitsui Financial Group—said they provided about
$4 billion each to a $75 billion loan package for that deal.
That represents only a fraction of the big three's total
overseas lending. The balance of Mitsubishi UFJ's overseas lending
totaled ¥ 42.4 trillion ($352 billion) as of Sept. 30, while
Mizuho's was ¥ 22.6 trillion and SMFG's was ¥ 20.5 trillion. The
banks don't disclose the exact amounts of their contributions to
M&A loan packages.
Still, efforts to ramp up overseas M&A lending are a
positive for Japanese banks, said Akira Takai, an analyst at Daiwa
Securities, who noted that the money is mostly going to blue-chip
companies with higher investment grades.
"As dollar funding costs rise, financing for deals is more
profitable than normal lending," he said.
With its financial strength, Mitsubishi UFJ, Japan's largest
bank by assets, sees an opportunity to move well beyond financing
acquisitions by Japanese companies, said Makoto Kobayashi, head of
the banking unit's financial solutions group.
"We've seen increasing number of financing deals for
non-Japanese M&A activities this year and I feel our presence
has been more recognized," Mr. Kobayashi said.
The bank's alliance with Morgan Stanley has helped it expand its
role in global deal financing, Mr. Kobayashi said. The Japanese
bank took a 20% stake in Morgan Stanley in 2008, and the two have
joint ventures in Japan.
"In global deals that Morgan Stanley advises, we get financing
even if they [the companies] are not Japan-related," he said.
M&A financing on a global scale presents some challenges for
banks more accustomed to working with well-known partners.
Takahiko Yasuhara, general manager of the international
coordination division at Mizuho Financial Group, said Mizuho works
to get to know the biggest companies in regions around the world so
it won't be caught by flat-footed if a deal is struck.
"We are often asked by an acquiring company to provide financing
for an upcoming deal Friday and to get back to them with a yes or
no over the weekend. So to make a quick decision, we have to build
close relationships with such companies," he said.
Mizuho contributed to $34 billion in financing toward Teva
Pharmaceutical Industries' $40.5 billion acquisition of Allergan's
generic drugs businesses announced in July.
SMFG President Koichi Miyata said he tries to meet a top
executive at a major company whenever he goes on a business trip
abroad. "Financing deals is about whether you can maintain
relationships with a business client…so I'm trying to reach out to
contacts during my business trips in Asia, the U.S. and Europe,"
Mr. Miyata said.
Despite having ample cash on hand, Japanese bankers acknowledge
that they could also face a challenge raising U.S. dollars for
overseas lending as interest rates rise following the U.S. Federal
Reserve's rate increase this month.
Mr. Miyata said SMFG would use dollar deposits and the
commercial-paper market, while trying to build dollar holdings by
issuing dollar corporate bonds and converting yen.
Write to Atsuko Fukase at atsuko.fukase@wsj.com
(END) Dow Jones Newswires
December 29, 2015 08:05 ET (13:05 GMT)
Copyright (c) 2015 Dow Jones & Company, Inc.
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