TPG, the US buy-out group, is set to buy a major stake in a Japanese finance company listed in New York and Tokyo and take 50 per cent of its Chinese subsidiary in a deal worth about $300m ($617.4m).
The deal, which would be TPG’s largest investment in Japan to date, is expected to be announced later this week, according to people familiar with the matter.
TPG’s planned investment in NIS Group in Japan and Nissin Leasing (China) comes at a critical time for NIS, which has seen a sharp increase in funding costs and a plunge in the value of its shares.
It is understood that NIS may also seek a bank as an investor alongside TPG to lock in funding for its Japanese operations.
NIS exited the consumer finance business in 2004 and has been diversifying into other businesses, such as real estate finance. But it has been hard hit by new consumer finance rules and a court ruling that has forced finance companies to give compensation to borrowers who paid high interest charges on their loans in the past.
That requirement has led to huge losses for many finance companies and consolidation in the sector, with Citigroup and General Electric, in effect, pulling out of the business in Japan.
TPG is buying the Japanese operation at a price that represents about half of book value. In the past, NIS has traded at as much as two times book value.
NIS’s business in China, where it provides loans to small and medium-sized companies, is thriving but needs money for expansion to take advantage of China’s strong economic growth.
The group plans to list its China operation possibly as early as next year. Both TPG and a spokesman for NIS declined to comment.