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ECONOMY

Corporate Japan steps up sell-offs to trim fat

  • October 14, 2019
  • , Nikkei Asian Review , 4:29 p.m.
  • English Press

YUTA TSUNASHIMA, Nikkei staff writer

 

TOKYO — Japanese companies sold off part of their businesses in 219 cases in the nine months through September, the most for the period since the global financial crisis a decade ago.

 

Back then, corporations restructured to stanch their bleeding. But now, they are taking advantage of today’s favorable conditions to shed noncore operations and invest the proceeds in priority areas.

 

Sales of subsidiaries and other business units jumped 16% from a year earlier, transaction levels not seen since 2010, according to data from Tokyo-based merger and acquisition consultancy Recof. The numbers reflect deals decided on by listed companies and exclude sales of overseas subsidiaries.

 

Some companies are essentially switching out one business for another. Takeda Pharmaceutical completed its purchase of Shire, gaining access to the Irish company’s pipeline of orphan drugs. Takeda separately agreed to sell businesses involved in eye drops and a surgical patch. The drugmaker is looking to carve out noncore operations, which contribute around 20% of revenue.

 

Electronic device maker Omron is shedding fat, selling wholly owned subsidiary Omron Automotive Electronics to Nidec for 100 billion yen ($934 million) around the end of October.

Omron’s automotive electronic components business accounts for 15% of overall consolidated sales while logging an operating margin under 5%. Keeping up with auto-sector innovations proved too costly, so Omron decided to concentrate on control devices and health care. Proceeds from the sale will go toward growth investment.

 

 

Japanese corporations historically tended to hold on to business assets in the interest of preserving jobs, letting them go only when they became unprofitable. Now operations are put on the block if they are deemed noncore.

 

Roughly 90% of buyers this year are domestic companies. And corporate Japan remains burdened by poorly performing operations. Among all business segments of companies on the first section of the Tokyo Stock Exchange, a quarter have operating margins below 3% or are losing money.

 

Progress has been made, but not fast enough for critics. Roughly 1 business unit a year is cut loose for every 10 Japanese companies, based on data from Ministry of Economy, Trade and Industry — about half the rate in Western economies.

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