FinanceAsia will toast the winners at a cocktail reception at the Conrad Hotel in Tokyo on May 15.
DEAL OF THE YEAR
SoftBank’s $36.14 billion acquisition of Sprint Nextel
Lead financial adviser to Softbank: Raine Group
SoftBank’s advisors: Mizuho Securities, Goldman, Deutsche, JP Morgan, Credit Suisse
SoftBank’s legal advisors: Morrison & Foerster; Mori Hamada & Matsumoto; Dow Lohnes; Potter Anderson & Corroon, Foulston & Siefkin; Cooley
Sprint's co-lead financial advisers: Bank of America Merrill Lynch, Citi, Rothschild, UBS
Sprint’s legal advisers: Skadden, Arps, Slate, Meagher & Flom; Lawler, Metzger, Keeney and Logan; Polsinelli PC; Shearman & Sterling
In a highly complex and unusual cross-border M&A transaction, Softbank, an internet-based innovator operating in a wide range of sector-leading businesses, announced in October 2012 that it would invest $21.6 billion in US wireless carrier Sprint Nextel. The deal consisted of $16.1 billion to be distributed to Sprint shareholders, an aggregate $5 billion of new capital and $14.5 in net debt. Following the transaction, SoftBank owned approximately 78% of the company, on a fully diluted basis. It has since purchased approximately 2% more shares.
The transaction was the largest Japan/US cross-border deal ever and one of the biggest global technology-media-telecom M&A transactions seen in the last five years. It positioned SoftBank, whose main business segments are mobile communications, broadband infrastructure, fixed-line communications and internet, as one of the largest mobile communications company in the world in terms of revenues.
The deal amount, which initially stood at $20.1 billion, was increased by $1.5 billion following an 11th-hour counterbid of $25.5 billion from Dish Network, an American direct-broadcast satellite service provider. After due diligence, Sprint declared that ultimately Dish’s offer “did not lead to a proposal superior to SoftBank’s,” prompting Dish to retract its offer. The deal allowed SoftBank to gain a strong US foothold as part of its broader plan to internationalise and escape the stunted domestic growth of its home market. The company now has access to a market with 2.5 times more mobile phone subscribers than Japan.
BEST CROSS-BORDER M&A DEAL
LIXIL’s acquisition of 87.5% of Grohe for $3.84 billion jointly with DBJ
LIXIL’s financial advisers: SMBC Nikko Securities, BNP Paribas, DBJ, Moelis
LIXIL’s legal advisers: Linklaters; Mori Hamada & Matsumoto; Nagashima Ohno & Tsunematsu
Grohe’s financial advisers: Acxit Capital Management, Goldman, Credit Suisse, Morgan Stanley
Grohe's legal advisers: Clifford Chance; Nishimura & Asahi; Weil Gotshal & Manges
Building materials company LIXIL’s acquisition of bathroom fittings maker GROHE with the Development Bank of Japan wins this award this year due to its innovative financing, which helped minimize the risks and stands as an example for other Japanese companies looking to expand overseas.
This was the largest acquisition of a German company by a Japanese company and is symbolic of Corporate Japan’s growing desire to develop more global brands. LIXIL and its advisers moved quickly and saw off competitors and the possibility of an IPO.
The structure of the deal – 50:50 voting rights with the DBJ – meant that GROHE became an equity-method affiliate of LIXIL under Japanese accounting rules. This staved off pressure from goodwill amortization on LIXIL’s earnings and allayed fears of a credit ratings downgrade.
Only about 100 billion yen of the transaction is listed in the liabilities section of LIXIL’s balance sheet on a non-consolidated basis. LIXIL used non-recourse loans of about 160 billion yen, which is unusual for Japanese companies but are, again, not recorded on a consolidated basis. The structure of the deal still allows LIXIL to consolidate GROHE over time. It also has a call option on DBJ’s stake.
BEST PRIVATE EQUITY DEAL
KKR’S $1.67 billion acquisition of 80% of Panasonic Healthcare
KKR's financial advisers: Goldman, Moelis, SMBC Nikko Securities
KKR's legal advisers: Nishimura & Asahi; Simpson Thacher & Bartlett
Panasonic Healthcare's financial advisers: Bank of America Merrill Lynch
Panasonic Healthcare's legal advisers: Nagashima Ohno & Tsunematsu
KKR’s acquisition of Panasonic Healthcare is a rare example of one of Japan’s sprawling conglomerates selling a profitable subsidiary and shows a few chief executives in Japan are bold enough to drastically restructure their businesses if needed. KKR acquired 80% of Panasonic Healthcare for an equity value of about 165 billion yen ($1.67 billion at $1=99 yen) including net cash left on the balance sheet of about 10 billion yen. Panasonic kept the remaining 20%.
The fact such a marquee Japanese name as Panasonic sold one of its units to a private equity firm rather than strategic bidders is also a breakthrough for buy out firms that have largely been shunned in Japan. KKR’s in-house management consultancy has already swung into action and is working with Panasonic Healthcare on such issues as human resources and incentive schemes, key performance indicators, and whether to shift more manufacturing offshore.
The deal was also struck at a reasonable valuation for Japan. KKR paid less than eight times pro-forma EBITDA of about $180 million for three profitable business owned by Panasonic Healthcare.
BEST ECM DEAL
Suntory Beverage & Food’s $3.965 billion IPO
Joint lead bookrunners: Citi, Goldman, JP Morgan, Mitsubishi UFJ Morgan Stanley Securities, Mizuho Securities, Morgan Stanley, Nomura, SMBC Nikko Securities
Legal advisers: Mori Hamada & Matsumoto; Simpson Thacher & Bartlett
Suntory Beverage and Food’s listing on the Tokyo Stock Exchange in May 2013, the largest Japanese IPO by a non-financial company since 1999 and the largest global IPO in the period under consideration, steals the crown for this year’s best ECM deal. Totaling $4 billion equivalent, the deal came soon after Japan’s Nikkei Stock Average tumbled 7.3% on May 23 following concerns around Chinese manufacturing and indications that the US Federal Reserve would begin cutting back its bond-buying stimulus programme.
The fall was the biggest in percentage terms since the earthquake and tsunami of March 2011.
Suntory, like all businesses in Japan, faces poor domestic growth prospects due to the country’s ageing population. Having previously announced a long-term sales target of ¥2 trillion by 2020, the company was seeking to raise funds through this IPO to pursue growth through targeted acquisitions. It also wanted to expand existing businesses as a result of an enhanced balance sheet and access to equity markets.
The deal launched against a highly volatile market backdrop on May 29 at an indicative price of ¥3,800 per share. Investors were rattled by what had seemed, just a few weeks earlier, an achievable valuation. Under pressure, Suntory set an unusually wide price range of ¥3,000-¥3,800 and emphasised its global strengths. In 2012 the company ranked fourth in global off-trade soft drinks and has a stable business in Europe following its acquisition of Orangina Schweppes in 2009. Hence, Suntory was an established global non-carbonated soft drink company whose peers were more like PepsiCo and Coca-Cola, not Kirin and Asahi.
Following a 10-day management roadshow across nine major cities, Suntory finally closed on June 24 at ¥3,100 a share, covering its book three times and pricing above the bottom of the range. Investors bought into Suntory’s management style and its ambitious but cautious M&A track record, which, along with Orangina Schweppes, includes Pepsi Vietnam in 2013, Garuda Food (Indonesia) in 2012, and Frucor (New Zealand) in 2009.
In terms of investor type, 30% of the shares went to long-only funds, 23% to sovereign wealth funds, and 43% to hedge funds.
The shares have since gained 14% on the IPO price.
BEST DCM DEAL
SoftBank's $3.3 billion-equivalent dual currency senior notes offering due 2020
Sole global coordinator: Deutsche
Joint bookrunners for the dollar notes: Deutsche, Bank of America Merrill Lynch, Credit Agricole CIB, Mizuho Securities, Morgan Stanley, Nomura
Joint bookrunners for the euro notes: Deutsche Credit Agricole CIB, Mizuho Securities, Nomura
Issuer's legal advisers: Morrison & Foerster; Mori Hamada & Matsumoto
Initial purchasers' legal advisers: Latham & Watkins
SoftBank’s $2.485 billion and €623 million bond offering in April 2013, the largest high-yield issue out of the Asia-Pacific region, underscored the scale and drive of Japan Inc’s overseas expansion. It also paved the way for more Japanese companies to tap international bond markets to help finance that push.
The mobile phone company issued the bonds as part of the refinancing of a 1.65 trillion yen ($16 billion) bridge loan initially arranged for SoftBank’s $20.1 billion purchase of an approximately 70% pro-forma interest in US wireless carrier Sprint Nextel announced in October 2012. Since the Sprint deal was not closed at the time of the bond offering, SoftBank considered a contingent issuance where it would raise the funds and place them in an escrow account. The company would then draw the money once the acquisition was completed. However, given the complexity and cost of this sort of deal, SoftBank opted instead for a straightforward bond issue.
As such, SoftBank pitched two different stories to investors, one based on a successful closing of the acquisition, the other on its failure. In the first scenario SoftBank and its bonds would likely be downgraded, so the company played up the company’s strong management record. The company stressed its intention to reclaim investment grade status within three to five years.
If the acquisition failed, investors would still be left holding investment grade paper paying a high-yielding coupon. The bond proceeds would instead be used as capital for the company’s domestic network or other corporate purposes.
The bond offering – the company’s US debut – was rocked by a counteroffer from Dish Network Corp. to buy Sprint This led to some speculation that the company would have to sweeten the terms of the deal or even postpone the sale. But after an intensive roadshow in the US, London and Hong Kong, the deal was instead increased by $1.3 billion equivalent. It also priced at the tight end of guidance, closing at 4.5% for the dollar tranche and 4.625% for the euro tranche.
For the dollar tranche, 87% of the bonds were placed in the US, with 8% going to Asia and 5% to Europe. Some 85% were sold to funds, 10% went to insurance and pension companies, 2% to banks and 3% to others. Meanwhile, 81% of the euro tranche was placed in Europe, 14% in Asia and 5% in the US. Funds took 90% of the bonds, banks 4%, insurance and pension companies 2%, and other 4%.
At time of print, the dollar bonds were trading at a bid/offer of 99.25/ 100.00 and the euro bonds were at 104.75/ 105.50. Both priced at par.
