2013.07.0802:44:52UTC+00Japan mergers decline to 9-year low as Yen volatility bolsters

Japanese companies made the least acquisitions in a decade during the first half as the yen’s volatility jumped to a four-year high, cooling purchasing interest.

The number of deals declared in the first half of 2013 was 997, with a total value of $45.7 billion. That’s the lowest amount of deals and value since the first six months of 2004. Total deal value is 47 percent lower from the first half of 2012.

Smaller Size

Marubeni Corp., Japan’s sixth-most acquisitive company in the last five years, last month cut the size of its purchase to buy U.S. grain trader Gavilon Group LLC by $1 billion from the $3.6 billion announced in May 2012 by excluding the energy unit from the final agreement. The trader said July 6 that it paid $2.7 billion for Gavilon in the end because of a “purchase price adjustment,” without providing details.

Second-Half Bounce

The total number of domestic and overseas acquisitions announced by Japanese companies in the first six months of last year was 1,167, the data show. The total deal value was $85.5 billion, according to the data.

Deal Pipeline

Japanese acquisitions abroad will recover in the second half as companies make adjustments to cope with the weaker yen, said Yuichi Jimbo, head of investment banking at Citigroup Global Capital Markets Japan Inc. in Tokyo. The bank has some deals that may be announced before year-end, he said in June.

Consumer companies may need to pursue overseas deals to offset the country’s long-term population decline and anemic domestic demand. Newly listed soft drinks company Suntory Beverage & Food Ltd. (2587) said last week it plans to use some of the proceeds from its $4 billion initial public offering for acquisitions in growth markets outside Japan.

Some companies have been slow to react to the yen’s volatility, and may not trust the currency to stay at current levels, the weakest in about five years, said Dale Caldwell, a Tokyo-based partner at Morrison & Foerster LLP, which advised SoftBank on Sprint.

“It may be that they see the weakening as a temporary adjustment and it’s just going to go the other way again,” Caldwell said. “Until they see things slow down, it may not be wise to make a move.”