Mitsubishi UFJ Financial Group Inc., Japan’s biggest banking group, expects the country’s acquisition boom to revive demand for corporate bonds and help boost its share of the debt market.
Mitsubishi UFJ, which tied up with Morgan Stanley in May 2010 to boost investment banking business, is targeting companies that plan to buy overseas assets for potential bond underwriting deals, said Hajime Suwa, head of debt capital markets at Mitsubishi UFJ Morgan Stanley Securities Co.
“Cross-border acquisitions by Japanese firms are now the mainstream,” Suwa said in an interview in Tokyo. “We need to make the most of this trend, as many companies intend to raise funds for acquisitions by issuing bonds.”
The Tokyo-based joint venture’s share of the Japanese debt underwriting market hovered at 22 percent last year, slightly lower than the year before it was formed, as firms stockpiled cash and shunned debt amid an economic slowdown. Debt offerings in the country fell 8.6 percent last year, according to data compiled by Bloomberg. Companies tapped cash and the strong yen to make the most overseas acquisitions in more than a decade.
Mitsubishi UFJ Morgan Stanley was the country’s No. 1 bond underwriter last year, including self-led offerings, with the sales last year valued at 2.9 trillion yen ($37 billion), compared with 3.5 trillion yen in 2009. Mizuho Financial Group Inc. ranked second last year and Nomura Holdings Inc. was third.
Japanese companies last year acquired the most overseas assets since at least 2000, with about 800 cross-border deals worth $88.7 billion, data compiled by Bloomberg show.
Mitsubishi UFJ Morgan Stanley last year sold a total of 70 billion yen of bonds for Kirin Holdings Co., Japan’s biggest brewer, Suwa said. The beverage maker acquired Brazilian beermaker Schincariol Participacoes e Representacoes last year for $4.4 billion.
Companies in the Topix Index have 97.8 trillion yen of cash, up from 79.5 trillion yen three years ago, according to data compiled by Bloomberg. Other cross-border deals in 2011 included Takeda Pharmaceutical Co.’s purchase of Swiss drugmaker Nycomed for 9.6 billion euros ($12.6 billion) in cash, the largest overseas acquisition made by a Japanese company that year.
In 2009, before Mitsubishi UFJ and Morgan Stanley formed the joint venture, their combined share of corporate bond underwriting in Japan was 22.1 percent. The Japanese bank ranked second in that year.
Suwa’s drive to boost market share follows goals set by Haruo Nakamura, who leads investment banking at Mitsubishi UFJ. Nakamura told about 200 managers at a meeting in Tokyo on Oct. 7 that the firm aims to raise its portion of Japanese corporate bond underwriting, according to Hiroaki Konishi, a Tokyo-based spokesman at Mitsubishi UFJ Morgan Stanley.
To propel the business managing bond sales for companies seeking takeovers, bankers from Suwa’s division will hold weekly meetings with the mergers and acquisitions team, he said.
Suwa also aims to lure debt-selling clients away from rivals by touting its ability to market corporate bonds to retail investors through Mitsubishi UFJ’s 772-branch network, Japan’s largest.
“Through our retail banking unit, companies can tap investors who are new to corporate debt investing,” he said.