GE offers $1.1bn for Sanyo Electric Credit
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General Electric said Friday it would launch a tender offer for Sanyo Electric Credit in a deal valued at up to Y135bn ($1.15bn) that would expand the US conglomerate’s presence in Japan’s leasing and small business loan sector.
The US group is offering Y3,250 a share, which is a 62 per cent premium to Sanyo Credit’s closing price of Y2,010 on Friday.
The high premium highlights GE’s determination to win Sanyo Credit. The US group is believed to have bid for Sanyo Credit two years ago, when Goldman Sachs acquired a 33 per cent stake for Y2,000 a share.
“Sanyo is cheap, compared with its peers, which have a price-to-earnings ratio of about 12, compared with Sanyo’s 9,” said Shinichi Iimura, analyst at Nomura in Tokyo. He said GE’s price gives Sanyo a price-to-earnings ratio of 15.
The US group aims to buy at least 66.7 per cent of the company for Y90.14bn. Sanyo Credit has agreed to the tender offer.
The deal reflects a pick-up in M&A activity in Japan, where domestic companies face growing pressure to shed unprofitable businesses.
It is the second foreign takeover bid for a Japanese company this month, following Citigroup’s Y1,578bn tender offer just over two weeks ago for Nikko Cordial, Japan’s third largest broker.
Matsushita, the Japanese industrial conglomerate, is also believed to be in talks with private equity over the sale of Victor, the group behind the JVC consumer electronics brand.
Buying Sanyo Credit would give GE a position in one of the more promising sectors of commercial financing at a time when its consumer finance and leasing businesses in Japan face significant challenges ahead, analysts said.
GE said earlier this month it would close 60 per cent of its manned consumer finance branches in Japan, following a sharp cut in the maximum lending rate that is expected to severely dent the profitability of consumer lending.
In its main leasing business of leasing machinery and equipment to large and medium-sized companies, GE faces a more difficult environment, according to Naoko Nemoto, analyst at Standard & Poor’s in Tokyo.
This is because a new law which would no longer allow companies to keep leases off their balance sheets, will make leasing less attractive to large companies that are able to fund their requirements through bank loans.
Sanyo Credit, however, is focused on leasing to small companies, which are less affected by the new law.
Goldman Sachs is expected to tender its shares but Sanyo Electric said Friday it had not made a decision yet whether to do so.
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