GE Capital to Buy 80% Stake In Japanese Car-Leasing Firm
May 04, 2011
TOKYO -- General Electric Capital Services Inc. announced it will buy an 80% stake in Marubeni Car System Co., a midsized Japanese car-leasing company, for between $231 million and $277 million. The move is the latest in a string of buyouts by GE Capital here and another sign that some foreign companies are now finding it easiest to enter Japan's market by acquiring local concerns, rather than by building a business from scratch. The price of the buyout will be set on May 15, 2011 will likely be between 25 billion yen and 30 billion yen ($231 million and $277 million), said Burch Rollins, president of GE Capital Car System, the unit that will manage Marubeni Car System. GE Capital, a unit of General Electric Co., will buy Marubeni Corp.'s entire 67% stake in the company, along with the 6% stake held by Orient Corp., a consumer-finance company. It also will buy half of each of the 7% stakes owned by Yasuda Fire & Marine Insurance Co. and Dai-Tokyo Fire & Marine Insurance Co.. Market Access Marubeni Car System will give GE Capital its first access to Japan's auto-leasing market, which Mr. Rollins believes can grow into something more like its size in the U.S. Leasing represents only about 5% of auto sales in Japan, he says, compared with around a third of sales in the U.S. The Japanese operation will be an addition to GE Capital's auto-leasing operations around the world, which manage more than 850,000 vehicles. The new unit should also complement GE Capital's growing consumer-finance business in Japan. The U.S. concern bought the assets of three consumer-credit businesses from Minebea Co., a Japanese ball-bearing company, nearly two years ago. Last year and this year it bought the credit-card and consumer-finance divisions of another consumer-finance company, Shin Kyoto Shinpan Co.. GE Capital is still in its growth phase in Japan, Mr. Rollins said, and ``we are interested in whatever financial-services areas where we could possibly provide some customer services.'' Japan is a good place for GE Capital to build a competitive consumer-finance operation, some analysts say. Many Japanese consumer-finance companies do scant credit checks on their clients, and charge interest rates as high as 20% to cover the risks of lending them money. ``There is scope for someone who has the size and systems and sophistication that GE has'' to focus on lending to strong borrowers at lower rates, said Davina Andre, an analyst at BZW Research Ltd. in Tokyo. Buying Its Way In GE Capital's growth in Japan also breaks with Japanese business tradition, because it has come largely through acquisitions of Japanese companies. Many foreign companies have shunned that tactic, believing that Japan's business establishment would ostracize any Japanese enterprises taken over by foreign firms. ``Maybe 10 years ago, very few people could imagine that acquisitions would be possible in Japan,'' said Mr. Rollins. But GE Capital has picked a good time to buy its way into Japan's consumer-finance business. Many big Japanese companies are looking to sell their consumer-finance units to refocus their efforts on core operations, analysts say. ``We see those changes as an advantage for someone like us to gain entry into the marketplace,'' Mr. Rollins said. GE Capital approached Marubeni about buying Marubeni Car Systems. The unit needed to ``strengthen its sales force, modernize its credit underwriting and collection expertise and get a cheaper funding scheme,'' said Patrina Bray, a director of Marubeni Corp. ``Marubeni believes that GE Capital is the right company to really make our baby grow.''
