Timothy C. Collins
It was a staggering payout. And one could argue that Timothy C. Collins got lucky -- very lucky. The deal in question was the hugely successful Feb. 20 initial public offering of Shinsei Bank, formerly known as the Long Term Credit Bank of Japan. Collins' Ripplewood Holdings LLC, a New York based private-equity firm, and a group of investors, bought Long Term Credit back in 2000 for $1.2 billion. Collins and his backers made about $2 billion on paper by selling off 30% of their stake in the revived bank.
Shinsei's turnaround was helped immensely by the Japanese government's decision to assume a big portion of the bank's debt. But no one is arguing these days that the deal was a flash in the pan. New proof that Collins and Ripplewood are the consummate Japan dealmakers came in May, when Ripplewood, after paying $2.3 billion last fall to buy the fixed-line operator Japan Telecom, sold it to broadband operator Softbank Corp. for $3.1 billion. That's an $831 million payoff for seven months' work. As with Shinsei, Ripplewood impressed potential buyers by recruiting an all-star cast to revamp the company, including ex-IBM Japan Ltd. Vice-President Hideki Kurashiga, who was brought in as president, and ex-Sprint Chairman and CEO William T. Esrey as a board member. They turned the strategic focus away from Japan Telecom's slower fixed-line corporate business to more promising areas such as Internet protocol services.
Once Japan Telecom's business was clearly on the mend, Collins opened talks with Softbank, the broadband purveyor that coveted Japan Telecom's blue-chip corporate clients. In announcing the early deal, Collins told reporters, "we judged that Japan Telecom could grow more by teaming up with a good partner." And the way the deal is structured, Ripplewood not only makes $831 million on the sale, but it will use $362 million of it to buy warrants equivalent to about 2% of Softbank's shares. If Softbank succeeds with Japan Telecom and its share price soars, Collins will, in effect, profit twice on the same deal.
Collins, 47, is kind of a paradox -- by turns shrewd dealmaker and sunny idealist. He grew up in the American state of Kentucky -- Ripplewood is named after his family's tobacco farm -- worked as businessman and banker for a few years, then in 1988 checked out of the business world to work at a refugee camp in Sudan for a year. Today, Collins is perhaps the most plugged-in foreign investor in Japan -- and he has got some high-powered U.S. competition, including Carlyle Group, Lone Star, and funds controlled for Wilbur L. Ross Jr.
In recent months, Japan's economy has been on a roll, and its stocks have been rediscovered by a wider audience of retail investors. So are there still reasonably priced acquisitions for the likes of Ripplewood to exploit? Collins' right-hand man in Japan, Ripplewood Japan Managing Director Hiroshi Nonomiya, says yes. True, he says, multinational players like Matsushita Electric Industrial Co. (MC ) and Nissan Motor Co. (NSANY ) have restructured, but many other companies are in desperate need of foreign capital and managerial smarts. A big chunk of Corporate Japan "has been protected and there hasn't been much industrial competition," says Nonomiya.
Collins flies to Japan about twice a month to suss out prospects and schmooze with political and corporate elites. His Japan-based staffers spend months visiting a targeted company before Ripplewood buys it and brings in aggressive new managers. Shinsei was saved by ex-Citibank Japan chief Masamoto Yashiro, who has made the bank, once a corporate lender, into a top retail institution. Luck? No. Just hard work -- and a deep faith in Japan.