Subprime Fallout Hits Japan M&A: No Deal for Sanyo’s Chip Division — Nikkei

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The Nikkei Shimbun reported today Sanyo has called off plans to sell Sanyo Semiconductor Co. to Advantage Partners, Japan’s largest buyout firm. The transaction had been priced at Y110 billion or approximately $940M. Shares of Sanyo (JP: 6764) [ADR: SANYY.PK] were down 7.1% to Y182 at the end of the morning session Wednesday. Goldman Sachs is one of three firms (including Daiwa Securities and Sumitomo Mitsui FG) that infused Y300B (approx. $2.6B) of capital in Sanyo last year for majority control of the firm. The lockup period for the convertible shares they own ended in March. I’m not aware any shares have been sold in the market or bought back by Sanyo, but I haven’t been following Sanyo as closely since it voluntarily delisted its ADRs, either. At any rate, Goldman and Daiwa, which each own 24.5% stakes in Sanyo, have their work cut out. A report by Reuters says Advantage Partners was pretty much denied funding by Citigroup and Merrill Lynch.

UPDATE: Sanyo has issued a press release, confirming it “will not sell the business … but will retain the semiconductor business as a key operation in its component and device division within the portfolio of the SANYO Group, set to be outlined in the new Mid-term Management Plan.”

U.S. M&A as a Percent of GDP

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Dana Cimilluca of Deal Journal (WSJ.com) pointed to data from Thomson showing that M&A deals as a percent of GDP currently account for about 4%, compared to 7% in 1999 at the peak of the dot-com bubble. Also, there’s a 67% correlation between economic activity and M&A since 1990 — the economy is slowing but still growing at around (a respectable) 3%. Source: WSJ.com, “M&A in Trouble? Not Necessarily

One thing to keep an eye on is the rising risk premium, which is making deals more difficult to finance. If anything, we won’t see as large of deals, but overall M&A activity should remain robust. Keep in mind a slower economy may compel larger firms to use M&A as a tool for growth/expansion, although it may not create shareholder value for the acquiring party.

Japan: Peaceful, But Uncertainty Limits Foreign Investment

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A recent Economist article, “Give peace a rating” (June 2, 2007), discussed the use of indices measuring “peace” to rank countries. The Economist’s sister co. Economist Intelligence Unit has one, found in the accompanying image (see below) from the article. Japan ranks 5th-highest in the EIU’s index. This is obviously a positive factor in terms of FDI and channeling investment funds to equities and making corporate investments. However, one problem Japan has in particular, is political/legal uncertainty — which at least partially explains the comparatively low levels of FDI and slow pace of outside M&A.

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Overworked I-bankers; M&A Action in Asia

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Below are two pieces from Wed.’s FT Alphaville’s The 6am Cut I’d like to share:

(1) “Overworked, understaffed, banks fear errors” — In short, executives at the world’s top i-banks admit their staff are under pressure from the record volume of M&A activity. [By the way, I read on a WSJ Deal newsletter / blog that disappointing results from Lazard and Greenhill are not worrisome since (according to both firms) they expect a busy second-half from backlog.] What is worrisome, as the FT Alphaville team reports, “… overworked staff around the world are in danger of making costly mistakes,” according to senior i-bank executives. Hey, I’ve got fresh legs, put me in!


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