Acquisitive Action In Japan

TWO BIG life-sciences deals surfaced last week in the perennially staid Japanese business world. Industrial Equity Investments Limited (IEIL), a unit of London-based Permira Advisers, agreed to acquire Arysta LifeScience, the Tokyo-based agricultural chemicals firm, for about $2.2 billion. And Kirin, one of Japan's largest brewers, is offering $2.6 billion to acquire a majority of drugmaker Kyowa Hakko Kogyo.

Arysta, the world's 10th-largest crop protection company, with 2006 sales of about $1 billion, was put up for auction earlier this year by its owner, U.K. private equity firm Olympus Capital. Olympus first invested in Arysta in 2002, partnering with Tomen and Nichimen, which had previously formed Arysta by merging their agchem operations. The Japanese firms sold their shares to Olympus earlier this year.

Olympus says Arysta's profitability doubled under its ownership. "Olympus Capital has consistently supported Arysta's growth plan," adds Arysta CEO Christopher Richards. "We are confident that we will have IEIL's ongoing support."

Meanwhile, for beer maker Kirin, purchasing a drug company may seem like a stretch, but it's not. Kirin already has a pharmaceuticals division that posted 2006 sales of $590 million. The company, which has extensive fermentation expertise, has commercialized a number of drugs and is researching antibody-based treatments.

With sales of $3.1 billion in its latest fiscal year, Kyowa markets a range of prescription drugs in Japan. It also produces amino acids, food ingredients, and industrial chemicals. Kirin and Kyowa say a merger will increase cost-efficiency and boost their research capabilities.

Both announcements are significant given the historic aversion of Japanese companies to be acquired, especially by non-Japanese or private equity buyers. But Peter Young, president of chemical and life sciences investment banking firm Young & Partners, says the deals indicate little change.

"Japan's is a very capitalist economy, but from an ownership and equity markets point of view, it's very different from the U.S. and elsewhere," Young says. "Yes, there are some changes that will allow private equity to come into play, and there have been a few successes. But the list is very short."