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No. 358, July 1999

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Japanese Companies in the US


In the last year or two, SOFTBANK CORP. has made a name for itself in the United States as a major financial backer of Internet-related start-ups, a number of which have earned it huge profits, at least on paper, when going public. Its reputation for savvy investing no doubt will expand with the launch of two record-breaking U.S. venture capital funds focused on promising Internet companies. One will be spearheaded by SOFTBANK CAPITAL PARTNERS LP of Newton Center, Massachusetts. It expects to raise $1.2 billion, including close to $500 million from Softbank itself, to invest in about 20 Internet ventures that plan initial public offerings within three to six months. The other investment vehicle will be organized by SOFTBANK TECHNOLOGY VENTURES L.P. of Mountain View, California. This $600 million-targeted fund, which will receive some $125 million from Softbank, will provide financing over the next three years for as many as 70 Internet businesses that are just getting started.

NTT SOFTWARE CORP. committed $5 million to the $50 million EnCompass U.S. Information Technology Partners II venture capital fund. Organized by ENCOMPASS GROUP INC. of Bellevue, Washington, the fund is seeking investment opportunities in the information technology field, particularly companies with cutting-edge Internet, electronic commerce and data warehousing software expertise. Along with its investment, NTT Software sent two employees to EnCompass in order to become more skilled in recognizing promising start-ups and nurturing them.

Having identified the IT area as a major growth opportunity in its medium-term business strategy, ITOCHU CORP. is prepared to provide roughly $16.5 million in financing to Silicon Valley Internet-related businesses in FY 1999. About half of this money will be invested directly; the rest will be turned over to venture capital funds. To date, the trader has invested a total of $16.5 million in approximately 40 high technology start-ups. It recently spread $24.8 million among 10 venture capital funds focused on entrepreneurial IT firms.

In the hope of speeding corporate diversification, CANON INC. is setting up a mergers and acquisitions group in the United States. The unit initially will be a division of Lake Success, New York-headquartered CANON U.S.A., INC., but the goal is to spin it off into a freestanding company within two years. The company's M&A specialists will consider investments in both new businesses and existing midsize companies in the target industries of optics, computers, defense and aerospace. Canon reportedly is willing to stake in excess of $82.6 million on any one firm.

Forming one of three joint businesses announced in May 1998, INDUSTRIAL BANK OF JAPAN, LTD. acquired a 50 percent in NOMURA SECURITIES GLOBAL INVESTMENT ADVISORS, INC., previously a wholly owned subsidiary of NOMURA SECURITIES CO., LTD.'s U.S. holding company. Headquartered in New York City with an office scheduled to open in Tokyo, NOMURA IBJ GLOBAL INVESTMENT ADVISORS, INC. provides advice to institutional clients on fund evaluation and manager selection as well as on asset allocation. It also monitors funds.

By chance, IBJ WHITEHALL BANK & TRUST CO., a wholly owned INDUSTRIAL BANK OF JAPAN, LTD. company (see Japan-U.S. Business Report No. 353, February 1999, p. 7), agreed at the same time to sell its corporate trust business to BANK OF NEW YORK CO. for an undisclosed price. The transaction, set to close in October, will allow IBJ Whitehall to focus on its core businesses of asset management, private banking, corporate finance and asset-based lending.

Due to complete its withdrawal from offshore banking operations by March 2000, DAIWA BANK, LTD. plans to give four foreign asset managers responsibility for handling the financial assets invested overseas on behalf of its pension and general corporate trust clients. In the United States, the Osaka-headquartered nationwide commercial bank tentatively has agreed to put FIDUCIARY TRUST CO. INTERNATIONAL in charge of U.S. equity investments. BROWN BROTHERS HARRIMAN & CO., also based in New York City, will be used for U.S. bond investments.

The commercial mortgage lending company that the New York City subsidiary of ORIX CORP. formed in the spring of 1997 with BANC ONE CORP. is slated to become a wholly owned unit of Japan's biggest leasing company. How much Orix is paying for Banc One's 55 percent interest in BANC ONE MORTGAGE CAPITAL MARKETS, LLC has not been disclosed. The joint venture has expanded quickly. It had assets of $593 million as of May 31, 1999 versus $37 million at formation. Moreover, at the end of last year, BOMCM was the fifth-largest commercial loan servicer in the United States. It also is a major player in the market for subordinate commercial mortgage-backed securities and an active originator of loans for securitization sale. Once the acquisition is finalized, Orix will rename the company ORIX REAL ESTATE CAPITAL MARKETS, LLC. The firm will remain focused, however, on commercial mortgage servicing, commercial mortgage-backed securities investments and commercial mortgage origination.

An exchange rate of ¥121=$1.00 was used in this report. aaaaaa

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