Japanese Financial Firms Back On The Acquisition Trail

[Mulboyne]

IHT: Tokio Marine Holdings to buy American company
Tokio Marine Holdings said Wednesday that it planned to buy the insurer Philadelphia Consolidated Holding for $4.7 billion in what would be the largest acquisition by a Japanese financial company in the United States. Tokio Marine, a major Japanese insurer, said it would pay $61.5 in cash for each share of Philadelphia Consolidated Holding, a 73 percent premium to its closing price of $35.55 on Tuesday. Tokio Marine's president, Shuzo Sumi, said earlier that he was looking at opportunities to acquire U.S. and European competitors to expand outside Japan, where it generates four-fifths of its profits. Japanese insurers face limited prospects for expansion at home because of a declining population and a slow-growing economy...Tokio Marine said it would leverage Philadelphia Consolidated's strength in property and casualty, or P&C, insurance to expand in the United States...At 8.4 times earnings, Philadelphia Consolidated carries the second-lowest valuation among its U.S. peers, according to Bloomberg data. Sumi said at a press briefing in Tokyo, "The purchase price is appropriate, as I don't think the current stock price reflects the intrinsic value of Philadelphia's business.

TMH are surely right to be looking overseas but you would think, in current market conditions, they would have had a strong bargaining position. However, paying a 73% premium - representing a third more than Philadelphia's all-time high - doesn't seem like the result of hardball negotiations.

[Mulboyne]

[pheyton]

If the pickings are good best to get in before someone else does. People from all over the world are probably salivating at the portions of companies they are going to be able to pick up at firesale prices.

[Mulboyne]

Xinhua: Mitsubishi mulls securities unit merger with Morgan Stanley Japan

Mitsubishi UFJ Financial Group Inc. is mulling merging its securities unit, Mitsubishi UFJ Securities Co., with U.S. investment bank Morgan Stanley's Japanese securities unit, Kyodo News Agency reported Friday. The company's merger with Morgan Stanley Japan Securities Co., if realized, will make one of the largest wholesale securities service firms in Japan, whose business includes mergers and acquisitions as well as bond underwriting. Further negotiations between the two firms are expected to pinpoint the method and timing of the merger as well as strategies to boost their overseas presence, Kyodo quoted sources close to the matter as saying. The move came after MUFG, Japan's largest banking group, said on Monday that it will acquire a 21 percent stake in Morgan Stanley, the second-largest U.S. investment bank, on a voting rights basis for 9 billion U.S. dollars. The capital injection deal will make MUFG the top shareholder in Morgan Stanley. Morgan Stanley Japan Securities posted a net profit of 3.2 billion yen on operating revenues of 213.9 billion yen in its fiscal year to March. It has 1,600 employees.

[Mulboyne]

KBC Securities have compiled a table showing how Japanese banks have avoided the bad loan write-offs of their overseas counterparts but have nevertheless seen their capital base eroded because of the collapse in value of their domestic equity holdings. This may limit their ability to move aggressively overseas unless they can raise additional funds. Certainly, the strong yen makes it significantly cheaper to buy non-yen assets but they are not as unconstrained as they looked just a few months ago.

[Mulboyne]

Reuters: Three Japan insurers in merger talks

Japan's Mitsui Sumitomo Insurance Group Holdings Inc, Aioi Insurance Co Ltd and Nissay Dowa General Insurance Co Ltd are in final talks on merging under a holding company as early as next autumn to form the country's top non-life insurer, national broadcaster NHK reported on Sunday. Sales of automobile and housing sales have been sluggish amid the economic downturn, hitting demand for car and fire insurance and weighing on the profitability of non-life insurers, prompting them to seek ways to boost competitiveness. The three aim to reach a basic agreement on the deal as early as next month, NHK added. Officials from the companies were not immediately available for comment. The merger of Japan's No.2, No.4 and No.6 non-life insurers would create the biggest player in the domestic market with revenue of about 2.7 trillion yen , NHK said. That would top current top non-life insurer Tokio Marine Holdings Inc.