Kikkoman is Now a Main Course In the M&A Game

 

SUSIE GHARIB: The recession is taking a huge toll on mergers and acquisitions around the globe. M&A activity is off by more than 35 percent this year. But it's a much different story for one company. Lucy Craft looks at a Japanese firm that still has a buyer's appetite.

LUCY CRAFT, NIGHTLY BUSINESS REPORT CORRESPONDENT: A salty aroma wafts through medieval archways of Noda City, east of Tokyo. What Hershey is to chocolate, Noda City is to soy sauce. This is home to one of Japan's oldest companies and the leading soy sauce maker on earth, Kikkoman. CEO Yuzaburo Mogi says he's ready for a bigger bite of the global food market.

YUZABURO MOGI, CHAIRMAN & CEO, KIKKOMAN: Because yen is strong and market price is low, so I think it's a good chance for us to buy a non- Japanese company.

CRAFT: Kikkoman is not alone. A swath of Japanese firms in food, pharmaceuticals and other sectors, boasting solid-gold balance sheets, suddenly are among the few players with the motive and the means to make acquisitions nowadays. Attorney Asa Shinkawa.

ASA SHINKAWA, ATTORNEY, NISHIMURA & PARTNERS: There are Japanese companies which have no debt and excess cash piles and for those companies -- especially those who, sooner or later, have to look for overseas market for their future growth. So long as outbound acquisition makes strategic sense for their business, now is a good environment.

CRAFT: Its black condiment, an essential staple of restaurant and home kitchens, Kikkoman has weathered the financial crisis with scarcely a ripple. Instead, for the 400-year-old company, crisis spells opportunity.

MOGI: In America, we acquired two health food companies. I think we might acquire more in the future. At the same time, we have interest in companies which have synergy with soy sauce and distribution.

CRAFT: Attorney Scott Jones of Jones Day says the phenomenon has as much to do with crippled private equity funds as flush Japanese corporations, also known as strategics.

SCOTT JONES, ATTORNEY, JONES DAY: The credit crisis, means that the private equity model means they can't leverage, even if they got cash. They can't leverage the way they used to. Therefore, the returns are lower, so their ability to do deals is impacted. And I think this is giving strategics with money, which means the Japanese strategics, a chance to get back in the ball game. That's what you're seeing.

CRAFT: Unlike the reckless trophy investing of the 1980s, the current wave of buying involves a select number of firms aiming to expand their core businesses.

SHINKAWA: I don't think, for all Japanese corporation, this is a time for engaging overseas transaction. But Japanese companies which have relatively sound financial condition, now is the time for them to use this opportunity for a springboard for their future growth.

CRAFT: Last year, foreign acquisitions by Japanese companies surged to the tune of nearly $80 billion. M&A experts reckon that 2009 will be an even busier year, as cash-rich Japanese corporations scour the globe for deals. Lucy Craft, NIGHTLY BUSINESS REPORT, Noda City, Japan.

 
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