One of the leading cross border investment trends of 2004 is shaping up to be the re-engagement of Japanese capital with the rest of Asia. On Friday last week it was announced that Mitsui Sumitomo Insurance has bought 24.9% of Ayudhya Insurance of Thailand for a total consideration of Bt1.680 billion ($43 million).
While not a large transaction, it clearly represents how Japan Inc. is looking to invest in Asia again, having taken fright after the financial crisis. The deal sees Mitsui Sumitomo Insurance becoming an active but not controlling shareholder in Ayudhya, seeking to leverage Ayudhya's distribution capabilities with its own skills in underwriting and risk management. Such a partnership approach is typical of the way Japanese companies seek investments in the region. Japanese corporate acquirers tend to be more willing to take smaller stakes and partnership deals than western firms, for whom control is often the sine qua non of investing.
Ayudhya Insurance was founded in 1950 and listed in 1987. It now has total assets of Bt6.1 billion, shareholders funds of Bt5 billion and paid up capital of Bt250 million. In the first nine months of 2003 it made profits of Bt242 million.
Mitsui Sumitomo Insurance has paid Bt27 a share for its stake, which is a 53% premium to Ayudhya's closing price on Tuesday last week of Bt17.6 a share. It is unclear from whom the Japanese company has bought the shares, although sources close to the deal say that Rataranak family, the major shareholder in the company has retained its 30% stake in Ayudhya Insurance. HSBC in Japan advised Mitsui Sumitomo Insurance on the deal.
The investment is the second deal Mitsui Sumitomo has made in the Thai insurance sector in the last month. In late January the company bought a 10% stake in Bangkok Life Assurance by paying Y1.6 billion ($15 million). It made this investment in conjunction with Nippon Life Insurance, which upped its stake from 9.45% to 16.4%.
Japanese money has been making a comeback to Asia in the last year. M&A deals such as Asahi and Itochu's investment in Tingyi's beverage subsidiaries in China and Sumitomo's acquisition of the Tanjung Jati B power plant in Indonesia are heralding a return to the 1980s and 1990s when Japanese companies were at the forefront of the phalanx of foreign investment in the region.
Having withdrawn in the late 1990s due to problems at home and losses suffered in the regional crisis, Japanese companies now look set to return, richer, wiser and looking to partner in Asia's next round of growth. Indeed, according to Bloomberg data, in 2000, Asian acquisitions by Japanese companies only comprised 7% of the total value of global acquisitions by Japanese companies. In 2003 that percentage had gone up to 26% an almost fourfold increase. M&A bankers in Asia are predicting that that figure will be even higher in 2004.
(For more on Japanese investment in Asia, watch out for the February 2004 edition of FinanceAsia magazine in which we comprehensively examine this topic as our cover story.)
