Orix Corp., a Japanese owner of leasing and insurance businesses, agreed to buy control of Rabobank Groep’s asset-management unit for 1.94 billion euros ($2.6 billion) in its largest-ever acquisition.
The Japanese company will purchase a 90 percent stake in Robeco Groep NV, gaining a Dutch mutual-fund brand that dates to 1929 and Chicago-based Harbor Capital Advisors. Rabobank, the biggest Dutch savings bank and mortgage lender, will retain 10 percent of Robeco and receive as much as 150 million euros of Orix shares, the Tokyo-based company said in a statement today.
Orix, which also manages Japan’s Buffaloes baseball team, will take control of an asset manager with growing earnings and 189 billion euros of assets as of the end of last year. The company is buying financial businesses to boost its capital and expand in faster-growing markets abroad, while Rabobank is shedding units to help strengthen its finances amid slowing asset growth and competition for deposits in the Netherlands.
“We should be able to go for another sizable deal in the coming year,” Chief Executive Officer Yoshihiko Miyauchi told reporters in Tokyo following the announcement. Miyauchi said he expects to see opportunities in Southeast Asia and South America, where the company opened a Brazilian unit to seek acquisitions in September.
The purchase is the largest overseas acquisition announced by a Japanese company since mobile-phone operator Softbank Corp. said it would pay $20.1 billion for control of Sprint Nextel Corp. on Oct. 15.
The deal was announced after Tokyo trading ended for the day. Shares of Orix, which was established in 1964, rose 0.2 percent to 10,330 yen, taking their gains for the past year to 32 percent. Rabobank, a Utrecht-based cooperative made up of independent lenders, isn’t publicly traded.
Rabobank has owned Robeco since 2001. The unit has about 1,500 employees in 15 countries, according to its website, and reported full-year profit of 197 million euros for 2012, up from 134 million euros in 2011. Among its divisions, Harbor Capital had about 45 billion euros in assets at the end of 2011, while Rotterdam-based fund manager Transtrend had assets of about 7 billion euros.
Orix’s previous biggest purchase was the 50-billion-yen ($540 million) acquisition of U.S. investment bank Houlihan Lokey Howard & Zukin in 2006.
Seeking to insulate themselves from an anemic domestic economy, Japanese companies struck a record $105 billion of overseas acquisitions last year, data compiled by Bloomberg show. Ambitious CEOs including Orix’s Miyauchi are driving the spending, said Nobuo Sayama, a managing director at mergers adviser GCA Savvian Group Co.
“Big deals need decisive leaders,” Sayama said in an interview last week. “That may accelerate Japan’s M&A momentum this year, possibly exceeding 2012’s deal count.”
Orix’s revenue increased 12 percent to 783 billion yen in the nine months ended Dec. 31. Net income climbed 35 percent to 90.1 billion yen, propelled by higher profits from real estate, insurance and mortgages, according to a filing with the Tokyo Stock Exchange in January.
The extra yield investors demand to own Orix’s $750 million bonds due 2015 rather than Treasuries dropped 4.9 basis points to 151.8 basis points at 5:34 p.m. in Tokyo, according to BNP Paribas SA prices. Orix’s credit-default swaps, the cost to insure debt against non-payment, rose one basis point to 119.5, according to data provider CMA.
Rabobank is selling assets as it seeks to meet a target for its core Tier 1 capital ratio, a key measure of financial strength, of 14 percent in 2016, higher than required by regulators. The ratio stood at 12.7 percent at the end of June. The company’s profit fell 29 percent in the first half of last year on bad loans to the Dutch construction, retail, property and horticulture industries.
The sale of Robeco is expected to boost Rabobank’s core Tier 1 ratio by 70 basis points, Chief Financial Officer Bert Bruggink told reporters on a conference call today. A basis point is a hundredth of a percentage point.
“This looks like a good price, even when taking into account the rally in shares of asset managers in the last months,” said Jan Willem Weidema, an Amsterdam-based analyst at ABN Amro Bank NV. “The resulting book gain should provide an decent uplift in Rabobank’s core Tier 1 ratio.”
Among publicly traded European asset managers, shares of Henderson Group Plc have rallied 23 percent so far this year, while Aberdeen Asset Management Plc has gained 18 percent.
Rabobank announced it was reviewing options for Robeco last April. In July, it sold a controlling stake in Bank Sarasin & Cie., a Swiss private bank, for more than 1 billion Swiss francs ($1.1 billion) to Safra Group.
The need to own an asset-management firm has diminished as Rabobank’s local lenders increasingly sell funds from other companies, Bruggink said.
Orix was advised by Goldman Sachs Group Inc., it said in today’s statement. Rabobank and Robeco were advised by Barclays Plc. and JPMorgan Chase & Co. respectively.