Japan Inc. Turns to South Korea for Takeovers After Earthquake, KDB Says

Japanese companies, the third- biggest buyers of South Korean assets this year, will increase takeovers on the peninsula as they boost manufacturing overseas and take advantage of a strong yen, Korea Development Bank said.

“Investors from Japan are looking for stable production bases and more diversified sources of goods after the earthquake,” Kim Hyung Jong, 57, head of mergers and acquisitions at state-run Korea Development said in an interview. “Acquisitions are increasing and I see that continuing.”

Japanese companies are investing in areas including alternative energy and manufacturing, Kim, whose bank is South Korea’s top takeover adviser this year, said yesterday in Seoul. They’ve been helped by a 13 percent decline in the won against the yen in the third quarter, the worst performance among the 10 most traded Asian currencies tracked by Bloomberg.

Japan’s factory output plunged by a record in March from February after an earthquake and a tsunami on March 11 led to factory closures, supply chain disruptions and a nuclear crisis. Japanese acquisitions of South Korean companies this year reached a record $792 million, beating the previous peak of $768 million in 2009, according to Bloomberg data. The number of takeovers rose 83 percent from 2009, the data show.

KDB, as the bank is also known, jumped to be the No. 1 merger and acquisitions adviser this year by arranging $7.96 billion worth of deals, giving it an 18 percent market share, according to Bloomberg data. That compares with $168 million worth of deals it helped arrange last year, when the bank was ranked at 30th.

Toshiba Deal

Seoul-based KDB’s deals this year include arranging Toshiba Corp. (6502)’s $35 million investment in South Korean wind turbine maker Unison Co. through convertible bonds. Tokyo-based Toshiba said in a May 23 statement that the alliance would give it distribution rights for Unison’s generators worldwide.

“While global investment banks may retain their dominance for cross-border deals I expect domestic firms will continue expanding their shares for local deals,” said Kim. “We have a wider network, better understanding on local partners and can provide services at lower cost than overseas rivals.”

Domestic firms including KDB, Samsung Securities Co. and Woori Investment & Securities Co. topped the South Korea’s takeover advisory market this year, while the Bank of America’s Corp.’s Merrill Lynch, KPMG Corporate Finance and Morgan Stanley were the top three last year, according to Bloomberg data.

In 2009, the previous annual peak, Japanese companies made 18 transactions in South Korean valued at $763 million, according the data.

The won weakened to 14.75 per yen as of 8:36 a.m. in Seoul and is forecast to strengthen to 13.31 in next year and 11.93 in 2013, according to forecasts compiled by Bloomberg.

To contact the reporter on this story: Seonjin Cha in Seoul at scha2@bloomberg.net

To contact the editor responsible for this story: Chitra Somayaji at csomayaji@bloomberg.net

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