Steel Blocks Unison Bid for Aderans

At Thursday's general meeting, Aderans Holdings Co.'s shareholders voted to accept the board of director candidates proposed by Steel Partners, a US investment fund. They also rejected the wigmaker's own propsal to select candidates from Unison Capital Inc., a domestic investment fund.

Aderans teamed up with Unison Capital to turn around sagging operations. Unison plans to make a TOB contingent on gaining board representation at the shareholders meeting. The wigmaker tried to win support for its board nominations by directly lobbying overseas investors and by having Unison lift its tender offer from 1000 yen to 1200 yen. But such efforts did not attract the support from shareholders, who have been frustrated with the poor performance of the company under current management. After the shareholder voting, Unison abandoned its TOB plan.

Japanese Endowments Also Hit Hard in '08

According to Nikkei, Keio University, which manages 150 billion yen ($1.5billion) in its portfolio, saw paper losses reach 53.5 billion yen as of March 31. Allocating roughly 80% of assets in stocks and investment trusts, it has sought an annual return of 3-4%. Numerous financial instruments held by the university have lost more than half their value in the wake of the financial crisis. Although other universities have not suffered from securities investments as much as Keio, they learned their lessons the hard way.

The roughly 500 entities underlying Japan's four-year universitites manage 9.15 trillion yen($91.5 billion) in assets. With the dwindling number of children, tuition income and government subsidies are bound to decline. Many academic institutions have moved to increase returns on their assets to pay for teaching and research expenditures as well as capital investments.

Unison: Sweetens Tender Offer Price for Aderans

Unison Capital announced that it will lift its tender offer price for battered wigmaker Aderans Holding Co. by 200 yen to 1200 yen a share. Unison Capital and Aderans are locked in a battle with US hedge fund Steel Partners for shareholder votes at Aderans' annual meeting scheduled on the 28th. Steel Partners, Aderans' main shareholder with a 27% stake had once asked other shareholders to reject Unison's earlier offer as too low.

Marunouchi Capital to Acquire 15% of Tomy

Tomy Co. a major toy maker announced that Marunouchi Capital Co., an investment firm established by Mitsubishi Corp and Mitsubishi UFJ Securities Co., Ltd., will purchase 15% of the company for a total of 8.42 billion yen ($ 89 million).

Marunouchi Capital will acquire 10% from TPG, which currently holds 14% of the company, and 5% from Tomy itself to become the largest shareholder, while TPG will purchase 5.6 billion yen ($ 59 million) of a convertible bond issued by Tomy. The toy maker expects to expand its overseas business capitalizing on Mitsubishi's global network.

Marunocuhi Capital launched its first fund in May 2008 with a commitment from Mitsubishi Corp, The Bank of Tokyo-Mitsubishi UFJ Ltd and Mitsubishi UFJ Securities Co.. With a total commitment of 100 billion yen ($1.05 billion), Marunouchi Capital Fund 1 is one of the largest among Japanese funds.

Lawson Drops Bid For am/pm Japan

Lawson Inc., the 2nd largest convenience store chain operator said it has abandoned its 14.5 billion yen ($145 million) plan to acquire smaller rival chain am/pm Japan Co. Lawson Inc. announced in March that it had agreed with REX Holdings Inc. to acquire all shares of its subsidiary, am/pm Japan Co., Ltd.

But the deal fell apart because Lawson did not accept the condition by the US owner of the am/pm brand am/pm international, that 700 stores in the group continue to use the am/pm name after the acquisition. The $145 million deal would have helped Lawson catch up with the industry leader Seven-Eleven, a unit of Seven & I Holdings.

Merrill Reports Sharp Turnaround in Investor Sentiment

According to the May Merrill Lynch & Co.'s global fund manager survey, sentiment towards the global economy has completed a sharp turnaround from October 2008, when a net 60 percent of investors forecasted a worsening outlook. In May’s survey, a net 57 percent say the economy will improve over the next 12 months, up from 26 percent in April. Investors have moved to a net underweight position in bonds for the first time since last August. Many are rushing to emerging markets. A record net 40 percent of fund managers are looking to overweigh the region in the next 12 months.

The survey also revealed that the number of investors underweighing Japan is decreasing. Nikkei reported foreign investors turned to net buyers in April for the first time in eight months.

Cosmos Initia Secures JPY 11 billion Bridge Loan

Further to our article on May 7 regarding Cosmos Initia Co. (8844), it was reported today that the condominium marketer secured 11 billion yen (USD 115 million) in bridge loans from Bank of Tokyo-Mitsubishi UFJ, Sumitomo Mitsui Banking Corp., Mizuho Corporate Bank and Sumitomo Trust & Banking Co. The financing was approved by lenders who attended the first meeting of debtors-in-possession on April 28. Cosmos Initial is Unison Capital's portfolio company and is pursuing reorganization under an alternative dispute resolution mechanism.

Macquarie to sell Japan Airport Terminal shares

Japan Airport Terminal Co.'s (9706) stock rebounded today, after The Nikkei reported that the firm is looking to repurchase 21.9% of its outstanding shares (worth approximately USD 220 million), including the 19.9% stake held by Macquarie Group Ltd. of Australia. The TOB price of 1,000 yen is at a slight premium to the May 19th closing of 956 yen, but at a discount to the past 3 months average. Macquarie began buying the terminal operator's shares in 2007, prompting the Japanese government to consider the possibility of restricting foreign investment in airport-related companies. The share price peaked at 2840 yen in August 2007 and Macquarie's holding cost is reportedly at 2,289 yen per share.

Earlier this month, Macquarie Group reported AUD 2.5 billion (USD 1.8 billion) loss from the investments in real estate and infrastructure, though it still maintained an AUD 870 million (USD 650 million) profit for FY 2008 (ending March 2008).

Q1 2009 GDP - 4% on Quarter or -15.2% Annualized

Japan's real GDP fell 4.0% in Q1 2009 from the previous three months, Cabinet Office data showed. The decrease translates into -15.2% on an annualized basis. This is the sharpest quarterly fall since 1955 and marks the first-ever four-quarter run of declines. The Government also revised down figures for Q4 2008. GDP in that quarter fell 3.8% from the previous three months, or an annualized 14.4%, rather than sliding 3.2% on a quarter, or an annualized 12.1%, the data showed.

With these, the real GDP growth for FY 2008 (12 months ending March 2009) fell to -3.5%.

The decline comes as business and consumer spending fell sharply along with exports. However, the May analyst survey shows 37 economists on average expect +1.1 % growth (annualized basis) for Q2 2009, suggesting that the economy has probably bottomed out in Q1 2009. The same economists projected -1.5 % growth for Q2 2009 in the last survey conducted in April.

T&D To Join Bidders For Nikko Asset

T&D Holding Inc, the parent company of Taiyo Life and Daido Life, has bid for Nikko Asset Management Co.(Aum:$90 billion), Citigroup's fund management arm in Japan, offering more than $1.05 billion, according to the Nikkei. The T&D group has been aiming to expand its asset management business in the past few years. Sumitomo Mitsui Financial Group and Nomura Holdings Inc group are said to be among other bidders.

Fuji Media To Launch Tender Offer for Cecile

Fuji Media Holdings Inc, a media conglomerate, announced that it will make a tender offer for shares of Cecile Co., one of the listed mail-order sales companies. The major shareholder of Cecile, LDH Corp. (former Livedoor Co.,) said in a separate release that it agreed to the tender offer by Fuji Media.

Fuji Media intends to beef up its mail-order business through this M&A.

Who is Doing Well in Japan Today?

1 out of 7 companies saw both profits and sales rise last fiscal year, according to calculations by The Nikkei. The key words are "saving", "healing" and "caring". Here are some examples:

Benesse Corp. (9783), a correspondence school, logged a 9% year-on-year jump in pretax profit to 39.2 billion yen. The company benefited from a trend to switch to affordable correspondence courses away from expensive cram schools.

Nihon Shokuhin Kako Co. (2892) grew 16-fold to 3.6 billion yen from the popularity of low-malt beers, which are cheaper than regular beers. The company supplies ingredients to brewers.

Gourmet Navigator Inc. (2440) enjoyed a 45% surge to 3.9 billion yen. The company operates a Web site offering information on restaurants, enabling users to search for quality but affordable places.

Nintendo Co. (7974) recorded a 2% uptick in pretax profit to 448.6 billion yen on the back of growing global sales. As consumers cut back outside excursions, gaming devices that enable users to play and study at home flourish. Hosiden Corp. (6804), which supplies parts for Nintendo game systems, along with software developers Capcom Co. (9697) and Hudson Soft Co. (4822), also fared well.

Unicharm PetCare Corp. (2059), a pet food maker, saw its pretax profit zoom up 31% to 6 billion yen, buoyed by beefed up offerings for aging and obese pets.

Sawai Pharmaceutical Co. (4555) had its pretax profit soar 31% to 4.4 billion yen thanks to increased demands for generic medicine.

Hogy Medical Co. (3593) saw sales of kits containing surgical gowns, scalpels and other items gain more than 10%, lifting its pretax profit 5% to 7.6 billion yen. There was an increased demand from domestic medical institutions aiming to improve efficiency.

1 Out of 3 Listed Companies Reported Losses

According to the Nikkei, 1 out of 3 listed companies reported losses for fiscal 2008. Of the 1,533 listed firms (excluding financials and start-ups) that close their books in March, 552 reported net losses for fiscal 2008. it compares to 177 companies in red for fiscal 2007, and 502 companies in red for fiscal 2001.

The high 2008 tally is partially attributed to firms bringing forward the booking of restructuring costs. Of the 552 companies, 217 companies would have kept themselves in black had they not booked a large one-time expense.

The largest losses were reported by Hitachi (USD 8 bn), Toyota (USD 5.5 bn), Panasonic (USD 4 bn), Toshiba (USD 3.5 bn), Dai-ichi Sankyo (USD 3.5 bn), NEC (USD 3bn) and Nippon Oil (USD 2.5 bn). Dai-ichi Sankyo was very severely hurt by its 2008 acquisition of India's top drug maker, Ranbaxy.

Material Shipments to China Soar

While total exports in March fell by 45% year on year, Japan's exports of industrial materials are showing a strong recovery, thanks to rising demand from China and other Asian economies. According to the Nikkei Daily, March exports of low-density polyethylene for packaging materials leaped 120% year on year, while shipments of polypropylene expanded 74%. Shipments of used paper and iron scrap are up 67% and 58% respectively, both reaching their all-time highs. Japan's exports of construction-use materials, such as steel bars and cement, to South Korea and Southeast Asian countries are also increasing.

Approximately 40% of Japanese exports are shipped to Asian countries with China being Japan's largest trading partner in recent years.

JAIC In Third-Party Restructuring Process

Japan Asia Investment Co.(JAIC), a major venture capital firm, said it will adopt an alternative dispute resolution (ADR) in negotiating with over 50 financial institutions to extend its repayment terms of an interests-bearing debt. This scheme is the same as the one selected by Cosmos Initia.

JAIC recorded a net loss of 35 billion yen in fiscal 2008. The company is saddled with about a 46 billion yen debt.

JAIC is one of a few listed VC firms not belonging to any financial groups. This time, being independent put the company into a corner.

Ant Global: Sold Bookoff Shares to Strategic Buyers

Ant DBJ Investment and Ant Global Partners Japan Strategic Fund 1 LP, both top shareholders of Bookoff Corp. sold their holdings to a consortium of 6 companies. Dai Nippon Printing and its 2 subsidiaries will acquire 16% while 3 major publishers (Kodansha Ltd., Shogakukan Inc. and Shueisha Inc.) will acquire another 13% of the company. Bookoff is the leading retailer of second-hand books, CDs, DVDs and video games with some 900 retail networks throughout Japan. Its sales in FY 2008 was approx. USD 500 million. The announcement caused the share price to soar from below 750 yen to 900 yen. At today's close, Bookoff's market cap stands at USD 180 million. The Ant group purchased shares of Bookoff at 825 yen in March 2008.

MUFG To Acquire $705 mn in Morgan Stanley Stock

Mitsubishi UFJ Financial Group Inc. said that it will acquire $705 million worth of Morgan Stanley common shares, bringing its stake in the US investment bank to over 20%. As Morgan Stanley will redeem its $705 million of non-convertible preferred shares, MUFG will not need to pay additional cash for the purchase.

With the rival Sumitomo Mitsui Financial Group acquiring Nikko CordialSecurities from Citi, MUFG intends to strengthen its investment banking business through enforcing a strategic alliance with Morgan Stanley.

Unison : Steel Partners Ready For Proxy Fight Over Aderans

In their official letter to all shareholders, US Investment Fund Steel Partners urged Aderans' shareholders to vote against Aderans' board slate at the 2009 general shareholders' meeting and to reject Unison's tender offer and dilutive sale of Treasury shares. Steel Partners stated that Unison's tender offer was inadequate, coercive, and damaging to existing shareholders. Now a proxy fight is inevitable.

Since the average cost of shares held by Steel Partners is said to be around 2700 yen、it is unlikely they will compromise with Unison's 1000 yen TOB price. Additionally, this TOB is irregular in that Unison will make a TOB after various proposals are approved at the Aderans' general shareholders' meeting. It is usually vice versa.

So this is a proxy fight with one player attracting shareholders via a "TOB".

Majority of Listed Regional Banks in Red for FY08

According to the Nikkei news, at least 48 of the 87 listed regional banks are expected to post net losses for the financial year which ended on March 31st. This will be the first time that more than half of the regional banks will awash in red ink. These banks suffered mainly from write-downs of marketable securities like stocks and foreign bonds in addition to bad domestic loans.

Feeling the necessity of increasing capital, some banks are tapping the market while others are turning to the government for help.

Sumitomo Mitsui to Aquire Orix Card Unit

Sumitomo Mitsui Financial Group(SMFG) and Orix Corp. agreed that SMBC will acquire a 51% stake in Orix Card Corp.(OCC) by July 2009. OCC will become a consolidated subsidiary of SMBC while Orix will continue to hold the remaining 49%.

These days SMBC has aggressively strengthened its strategic businesses through M&As.

Unison Capital; Cosmos Initia Turnaround via ADR

Major condominium developer Cosmos Initia Co. is attempting to save itself through an ADR (alternative dispute resolution). ADR is an unconventional third-party restructuring process mediated by the Japan Association of Turnaround Professionals (JATP), an ADR institution certified by the government under a special law for industrial revitalization.

Formerly known as Recruit Cosmos Co., Cosmos Initia left the Recruit Co. group in 2005 through a management buyout. Presently, investment fund Unison Capital Inc. holds the leading stake in the company.

With the condo. market in a slump, Cosmos Initia fell into a negative net worth of 52.7 billion yen in fiscal 2008. The company is also saddled with about 200 billion yen in debt. Under the plan, it hopes to slash about half of its debt.

Taking responsibility for the company's current financial situation, Satoshi Shigeta will step down as chairman. The company is also considering cutting payroll and asking Unison for gratuitous transfer of his shares.

SMFG Agrees to Buy Nikko Cordial Securities From Citigroup

Sumitomo Mitsui Financial Group and Citigroup said Friday that they have reached an agreement in which SMFG will acquire most of Citigroup's Japanese brokerage operations effective October 1st. SMFG will buy retail brokerage Nikko Cordial Securities and some operations of wholesale investment bank Nikko Citigroup for about $5.6 billion. SMFG also said it has agreed with Citi to form an alliance in corporate and investment banking, including mergers & acquisitions, sales, and trading services.

While SMFG already has wholesale investment banking operation Daiwa Securities SMBC, it is a bit of surprise that this Nikko deal included not only Nikko Cordial but also Nikko Citi. SMFG reportedly intends to consolidate the two Nikko operations.

When Citi announced its intention to sell its subsidiary this January, most of the industry thought Nikko Cordial's destination would be its "old home" Mitsubishi. Now Citi's forced sale seems to have triggered a large industry shake-up with a possible future merger between Daiwa and Nikko. This merger is what the No.1 brokerage house Nomura is most afraid of.

Renown Avoids Proxy Battle with Top Shareholder

Renown Inc, a major apparel maker, reached an agreement with Neoline Capital by giving up a seat on its board to the top shareholder. At one time, Neoline capital proposed assigning three executives to Renown's board and keeping Nakamura, the current CEO, at his post.

In avoiding the proxy fight, Renown will have a young top management team represented by the next CEO, 47 year old Kitabatake, and two other executives in their forties.