Orix Corp. (8591), a Japanese finance and leasing company, is in talks to spend about $400 million to buy a stake in a Dubai-based life insurer from a European bank, according to President Makoto Inoue.
Orix may acquire as much as 49 percent of an insurance holding company in the Persian Gulf state, Inoue said in an interview on Aug. 13. The Tokyo-based firm is now conducting due diligence to decide transaction terms, he said without naming the target or the seller.
“The Middle East is interesting,” Inoue, 59, said. “There are many joint ventures with European financial firms there, and we see opportunities as banks are now struggling with their businesses and want to sell non-core operations.”
Orix is also considering investment in aircraft leasing, asset managers and other insurers in Middle Eastern countries as European firms sell assets to rebuild capital and retrench in their home markets, he said. The company plans to sell about $3 billion in bonds this year to accelerate an overseas expansion plan hampered by Europe’s debt crisis and Japan’s record earthquake in 2011.
Inoue, also the company’s chief operating officer, said the firm is targeting 300 billion yen ($3.8 billion) of private- equity investments or acquisitions worldwide in the next three years. Orix has made more than 50 merger and acquisition transactions globally over the past five years, according to data compiled by Bloomberg.
“We view these investments in order to capture growth in the overseas markets positively,” Jefferies Group Inc. analysts led by Tokyo-based Mac Salman wrote in a report today, maintaining their buy rating on the stock. “Historically their investment has generally been done in a disciplined manner.”
Orix shares rose 1.8 percent, the most in three weeks, to 7,410 yen at the close of trading in Tokyo. They have jumped 17 percent this year, compared with the benchmark Topix (TPX) Index’s 5.1 percent increase.
To support global expansion, Orix aims to hire 50 local managers in 10 countries including South Korea, Vietnam, India, Singapore, Thailand, Turkey and Ireland, Inoue said. The company needs to add local people “urgently,” he said.
Total life insurance premiums in the six-nation Gulf Cooperation Council, which includes Bahrain, Kuwait, Oman, Qatar, Saudi Arabia and the United Arab Emirates, was $1.8 billion in 2010, a 12 percent increase from a year earlier, according to a report by Alpen Capital. That compares to global life insurance premiums of $2.5 trillion in the same period.
Economic growth in Dubai, one of seven sheikhdoms in the United Arab Emirates, will quicken to as much as 5 percent this year, according to government forecasts. Orix already has leasing operations in Oman, Egypt, Saudi Arabia and the UAE.
Inoue also said Orix plans to spend $1 billion to acquire aircraft in the U.S. and other countries over the next three years.
Orix Aviation joins Sumitomo Mitsui Financial Group Inc. (8316), Japan’s second-largest bank by market value, in expanding its leasing fleet to tap rising demand from airline customers seeking to avoid the costs of aircraft ownership amid a global economic slowdown. The Dublin-based unit plans to boost aircraft under lease and management, and its customer base, by about 50 percent, David Power, who heads the business, said in an interview last month.
The lessor plans to increase its fleet size to as many as 250 planes over five years and to widen its customer base to 100 airlines in three years, from 65, Power said. The company owns and manages 130 planes.
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