– Holding a “High-Level Workshop on International
Finance” for Japan’s Regional Banks –Hirohisa Yoshino

Mitsuhiro Matsunaga

Takuo Hishinuma

Deputy Director
Division 1
Finance Office for SMEs

Deputy Director
Division 1
Finance Office for SMEs

Division 2
Finance Office for SMEs

Deputy Director
Division 1
Finance Office for SMEs

Although some regional banks
and Shinkin banks may not know much about
JBIC yet, we showed their management,
through this workshop, about our proactive efforts to enhance cooperation with them in recent years. Recognizing the need to expand into
overseas markets due to the shrinking domestic
market, regional banks and Shinkin banks withno overseas offices face the challenge in meeting the needs of mid-tier enterprises and SMEsof their customers to start overseas business,by providing necessary financing support or information about the country or region where
their customers consider starting business. In
this respect, I believe this workshop gave regional banks and Shinkin banks a good opportunity to know that they can further support
mid-tier enterprises and SMEs who wish to enter into overseas markets, by providing a loan in
co-financing with JBIC or delivering the information about countries and regions which is
obtained through JBIC’s overseas network.

▶ Hishinuma▶ Ishibashi We hope regional banks andShinkin banks will supplement their services withthe diverse products we offer in supporting mid-tier enterprises and SMEs. For example, it may bechallenging for regional banks and Shinkin banks
alone to provide loans in local currencies, but they
can do so more easily by collaborating with JBIC.
During the workshop, we explained about Japanese companies’ overseas projects where JBIC
had recently provided funding support, includuing:i) the solar power generation project in Mongoliathat has also been accepted as a project to be implemented under the joint crediting mechanism
program led by of Japanese Ministry of the Environment, ii) the loans provided in local currencies,
for example, Mexican peso and Thai baht, and iii)
the project in Indonesia where JBIC’s guarantee
assisted regional banks and Shinkin banks to provide finance to mid-tier enterprises and SMEs do-

How is JBIC going to support mid-tierenterprises and SMEs in future?
The number of financial commitments JBIC made to mid-tier enterprises and
SMEs significantly rose in FY2016, accounting
for approximately 44% of its total number ofcommitments. We, in collaboration with regional
financial institutions, will support mid-tier enterprises and SMEs who wish to enter into overseas markets, both on the financial and informational fronts, such as by providing long-termloans in foreign currencies including local currencies, or by giving information about investment climate in countries and regions while organizing investment seminars.
I recognize that the relationships between regional banks and Shinkin banks, and JBIC havegrown deeper over the last several years as aresult of our efforts to support mid-tier enterprises and SMEs. Based on our closer relations
with regional banks and Shinkin banks, we wish
to have even more opportunities to work withthem in other fields than supporting mid-tierenterprises and SMEs. Amid shrinking domestic
market, Japanese companies are expanding
their overseas operations. We hope that we playa role in providing financial instruments andservices that will be helpful to regional financial
institutions when they assist Japanese businessabroad. At the same time, we would like to continue to seek a way to further expand andstrengthen our support for mid-tier enterprises
and SMEs, while always thinking about new financial services that we can offer in collaboration with regional financial institutions.
▶ Yoshino

URL: http://www.jbic.go.jp/en/

How would you like regional banks andShinkin banks to utilize JBIC’s financing
services in assisting mid-tier enterprises and SMEs to expand their businesses aborad?

ing business in the country.
In fact, when we talk to staff
members in regional banks and Shinkin banks,
they often say, “we wish we had known about
these financing schemes much earlier.” Whilethey are familiar with companies in the local
areas, JBIC is familiar with the local situationin developing countries through our connections in their governments or participation ininternational financial transactions. We would
like to make further efforts to meet the needsof regional banks and Shinkin banks by collaborating the mutual strength of regional financial institutions and JBIC.
▶ Matsunaga

Tel. +81-3-5218-3100

We established special teams thatare dedicated to supporting mid-tier enterprises
and SMEs in the Head Office in Tokyo as well as
in the West Japan Office in Osaka in April 2012.
Since then, we have continued to develop ourbusiness by making efforts to: i) visit regionalbanks and Shinkin banks (literally, “cooperative
credit banks”) to provide them with the information about our financing tools and co-financing
scheme, or ii) join, as a speaker, the seminars
they give to their customers. As a result of these
efforts, the total number of loans that JBIC provided to mid-tier enterprises and SMEs exceeded
100 in FY2014 for the first time. Given that the
total number of loans provided to mid-tier enterprises and SMEs annually before FY2012 is lessthan 20, we feel that our business to support
mid-tier enterprises and SMEs entered a newstage of development and that our efforts on enhancing partnership with regional banks andShinkin banks are gradually taking a positive
shape. Through this workshop, attended by presidents of regional banks and Shinkin banks aswell as directors of their international business
units, we believe that we were able to clearlycommunicate to them our intention and efforts toenhance the cooperation with them.
▶ Ishibashi Long-term loans in foreign
currencies to mid-tier enterprises and SMEs
are the most conventional financing instruments JBIC introduces to regional financial
institutions. In this workshop, we also explained our other financial products and services that we provide in addition to thoseconventional loans, such as providing loans
to overseas infrastructure projects in cofinancing with private-sector financial institutions or releasing the information about overseas investment climate. I believe thisworkshop had great significance in communicating to regional banks and Shinkin banks
about our various financing support that isavailable to not only mid-tier enterprises andSMEs, but also other business segments.
▶ Yoshino

What was the main message about thepartnership between regional financial
institutions and JBIC in the workshop?

Press and External Aﬀairs Division, Corporate Planning Department, Corporate Planning Group, Japan Bank for International Cooperation

It has been five years since JBIC realigned
its organization to strengthen the support
for the businesses of mid-tier enterprises
and SMEs. This is our first event to invite
most executives of Japanese regional
financial institutions with an aim to further
deepen the cooperation with them.

4-1, Ohtemachi, 1-chome Chiyoda-ku, Tokyo 100-8144, JapanOn April 12, 2017, JBIC held the “High-Level Workshop on International Finance” for Japanese regional financial institutions, whereapproximately 100 executives from over 60 across the country were present. This workshop is intended to further strengthen thecooperative relationship between those regional financial institutions and JBIC in providing financial support to mid-tier enterprises and small- and medium-sized enterprises (SMEs) who wish to start or expand their businesses abroad in the fields ofmanufacturing and infrastructure and in participating in JBIC’s financial schemes by purchasing liquidated loans of JBIC.

December 2017

Jun Ishibashi

JBIC Today

JBIC Strengthens Partnership withJapan’s Regional Financial Institutions in
Supporting Japanese Companies’ Overseas
Business Expansion

JBIC

December 2017

Today

Japan Bank for International Cooperation

Special Feature: M&A

Cross-border M&A :the Most Feasible Way forJapanese Companies to Grow
– To the center of the growth strategy –Our Global Challenges

Farmdo Corp. (Maebashi City, Gunma Prefecture)

Solar Farm Business : Shaping the Futureof World Agriculture
Farmdo’s efforts for farming business andsolar power generation in Mongolia
News in Depth

Towards Stronger Relations with Argentina;
Financing Export of Japan’s Railway Technology
S P OT L I G H T
JBIC Strengthens Partnership with Japan s Regional
Financial Institutions in Supporting Japanese Companies
Overseas Business Expansion

Cross-border M&A : the Most Feasible Way for Japanese Companies to Grow

Special Feature: M&A

Special Feature: M&A

Cross-border M&A :the Most Feasible Way forJapanese Companies to Grow
– To the center of the growth strategy –Recently, Japanese companies have been actively engaging in M&A with overseas companies as an important growthstrategy. According to data released by Recof Corporation, cross-border M&A by Japanese companies increased six-foldin 10 years by value, exceeding 10 trillion yen in 2016. Target industries and areas have been growing more diverse,
showing that M&A has become an established way of strengthening overseas business.
Since the start in fiscal 2011, JBIC’s cross-border M&A support scheme has assisted 184 M&As amounting to approximately USD 43.5 billion by the end of fiscal 2016. It supported not only large acquisitions but also M&As by midtier enterprises and SMEs, in diverse sectors from manufacturing to services. The backgrounds and purposes of these
M&As also ranged widely: if there were 100 companies, there could be 100 different backgrounds and reasons for crossborder M&A. Each company has its own growth strategy, and draws up its own acquisition strategy for developing overseas markets to realize that strategy. JBIC supports these efforts to expand overseas through M&A.

Cross-border M&As : the most feasible
way for Japanese companies to grow
―Please share with us the background of JBIC’s M&A supports.
Hashiyama As companies regained theirfinancial strength after the financial crisis
and as yen appreciated in early 2010s, Japanese companies came to increasingly seekfor M&A opportunities of foreign companies. With this background, Enforcement
order for the Japan Bank for International
Cooperation Act, came into force in July
2011, which enabled JBIC to launch its financial support for M&As. The yen is nolonger appreciating as rapidly as it was, but
2 December 2017 JBIC Today

Shigeto Hashiyama
Executive Officer and Director General
Corporate Planning Department(then Director General of Corporate
Finance Department)

acquiring foreign companies with the backup of a relatively strong yen is becoming
one of the most feasible ways for Japanesecompanies to grow. Companies can, ofcourse, select a corporate strategy of developing overseas markets slowly over time,
beginning with purchasing land and plantand building sales channels from scratch.
But they can also choose a strategy of “buying time through M&A,” and this way of
expanding eﬃciently by acquiring stableoverseas companies has become widespread in Japanese industry. In the “Infrastructure System Export Strategy” (revisedin May 2017), the Japanese government
suggests the policy, that Japanese companies may utilize JBIC’s M&A supports todevelop business for promoting collaboration with overseas companies as the size ofJapanese domestic market is limited.
― Please tell us about JBIC’s
M&A supports.
Hashiyama It can be classified roughly
into two patterns in terms of money flow.
One is direct financing in which JBIC co-finances with private financial institutions to

support funding of Japanese companies for
M&As. The other is indirect financing
whereby JBIC sets a credit line for private financial institutions who on-lend to Japanesecompanies for their M&A transactions (Figure 3 on page 4). Private financial institutions
have many branches across Japan, while JBIC
has two domestic oﬃces only, one in Tokyoand the other in Osaka. Therefore JBIC
should naturally cooperate with private financial institutions so that a wide variety of Japanese companies can use JBIC’s functions.
One example of a prominent loan
scheme is the subordinated loan (Note) that
Suntory Holdings Limited utilized to acquire Beam Inc. for about USD 16 billion in 2014 (see page 5 for details).
Borrowing a huge amount for the acquisition loan at one time reduces a company’s capital ratio drastically and may
cause a downgrade of its external rating.
To avoid this, Suntory chose financing
through a hybrid loan. Even though thiswas the first attempt, we wish to keep

Figure 1■ Cross-border M&As by Japanese companies(JPY 100 million)(No. of cases)

700

112,105

600

517
500
400

120,000

636

557
499

562

100,000

104,918

77,36380,000300
200

54,32260,00057,988100

40,000

0
2012

2013

2014

2015

2016
Source: Recof

providing tailor-made support thatsatisfies the requirements of Japanesecompanies in cooperation with private
financial institutions.

Note : Hybrid loan: Although it is classiﬁed as aliability in accounting, rating companies approve it
as part of the capital when assessing the ﬁnancial
condition of the borrower.

Large enterprises focus on Europe and America, and mid-tier enterprises
and SMEs select Asia
―How do you see the trend of overseas expansion by companies supported by JBIC ?
Hashiyama Since starting our support
program for cross-border M&A in
FY2011, the number of successful M&As
reached 184 cases totaling USD 43.5 billion as of the end of FY2016. We havesupported a variety of businesses including finance, insurance, automobiles, electricity and electronics, steel, chemicals,
maritime traﬃc, pharmaceuticals, foodand trading. One characteristic is thatlarge enterprises, mid-tier enterprises and
SMEs have branched out into diﬀerent
areas. Large companies mostly acquirecompanies in Western countries like theUS, Germany and France. This is presumably because Western companies havebuilt business models, constructed value
chains made up of sales channels, manufacturing, and R&D, and established governance, compliance and accounting
systems that meet the standards of advanced countries. Even though acquisitions of Western companies may notnecessarily provide great growth poten-

tial, they give Japanese companies a senseof confidence in the hope that synergies
will have positive eﬀects. In this sense, focusing on Western companies may be asound acquisition policy.
On the other hand, mid-tier enterprises and SMEs mostly target Asiancompanies. When a Japanese automakerbuilds a value chain in Indonesia, China

or Vietnam, its suppliers, which are mostly
mid-tier enterprises and SMEs, also gain
big business opportunities. However, theycannot expand their business abroad easily because they do not necessarily haveenough human resources and equipment.
This is why they branch out to a foreigncountry by acquiring a small local company or part of its business.

Figure 2■Cross-border M&As through JBIC s supports(Total number of M&As and total amount ﬁnanced)(No. of cases)

118

60
50

66

30

30

20

0

(USD 100 million)

120

55

88

85

40

10

FY2011–FY2016
Total 184 cases
Total amount of approx.
USD 43.5 billion

23

64

49

80
60

25

40

14

20

2
FY2011100

FY2012FY2013

FY2014FY2015FY20160

December 2017 JBIC Today

3Special Feature: M&A

Cross-border M&A : the Most Feasible Way for Japanese Companies to Grow

JBICʼs activities―What are the purposes of crossborder M&A by Japanese companies ?
Hashiyama The objectives of cross-border
M&A are diverse. One typical reason is that acompany wishes to expand overseas by acquiring a company in almost the same business. For example, a logistics company may
acquire a company specialized in the adjustment system of logistics, and a communications company may acquire a data center.
These two cases can create synergies easily
because one company acquires another inalmost the same business.

Another objective is to expand sales
channels or increase the product lineup.
The strategy is to increase the presenceof the lineup of the company ahead ofother companies by developing sales
channels by acquiring a company witha high market share in under-developed
areas. Other acquisitions may seek togain state-of-the-art technologies ordrugs in the early stage of development, or acquire a stable company withsolid future prospects even after entrusting of management to the local
company after acquisition, or acquisi-

tions of top companies in niche fields
with fewer competitors. Each company
has its own acquisition strategy mostsuitable for its growth strategy. Although some cross-border M&A by Japanese companies are said to have failed,such failures fall on companies that
paid too much for the acquisition. In
most cases, Japanese companies engage
in acquisitions strategically with a longterm perspective, and work on them seriously and cautiously. It is necessary toanalyze acquisition results in the medium to long term.

Supporting cross-border M&A as a government-affiliated financial institution―What is the role of JBIC in
the private financial institutions
it works with?
Hashiyama As the Suntory case shows,
our main role is to support to provide thelarge amounts of long-term foreign currency which private financial institutions
alone cannot always provide. JBIC’s basic
position on policy of supporting crossborder M&A is to devise the most appropriate system by which Japanesecompanies can develop foreign markets
eﬀectively and eﬃciently. Smoothly merging the specialties of the public sector andthe private sector is important to achieve
this objective, and we believe that JBIC
should play the fundamental role to support the private sector exhibit its abilities
to the fullest.
―What are the trends in M&A
and how will you address them?
Hashiyama M&A is certainly now not a
local trend limited to Japanese companies but a global trend. One recent interesting characteristic is mergers between
global giants. For example, businessgroups separated oﬀ from these global giants in the screening process conductedby the regulatory agency supervising antitrust in foreign countries can be interesting M&A targets opportunities.
However, in recent years, the paceof cross-border M&A by Japanesecompanies is slowing down. This ispresumably due to changing industrial
policies in the world amid the new policies of Trump administration and4 December 2017 JBIC Today

Brexit and because investment in the
Middle East is getting slower following
the decision of the Gulf Cooperation
Council to break off diplomatic relations with Qatar.
Nevertheless, Japanese companies havebeen accumulating reserves and may
step up cross-border M&A again after
the temporary lull. There are always
cases where investment by M&A is effective rather than investing in a foreign
market from scratch, and indeed, M&A

remains active in fields with brightprospects. JBIC will continue to support strategic expansion by Japanesecompanies in foreign markets including
cross-border M&A in accordance withthe policy of the Japanese government.
While monitoring the trends and influences of geopolitical risks in the world,from the perspective of a public financier we will keep monitoring customers faithfully even after they havecompleted acquisitions.

Figure 3■Direct ﬁnance for M&A in collaboration with private ﬁnancial institutions(Case of acquisition of Beam Inc., an American corporation, by
Suntory Holdings Limited)
Japan

JBIC

Overseas

Loan
JBIC s hybrid loan:
USD 1.5 billion and
JPY 50 billion

Privatefinancial
institutions

Suntory
Holdings
LimitedJBIC s loan:
USD 1 billion

Acquisition
Total amount:
Approx. USD
16 billion

Americancorporation

Beam Inc.

■Indirect ﬁnance through private ﬁnancial institutionsin accordance with the credit line set for them(Case of acquisition of Innovia Films (Holding) Limited by Futamura
Chemical Co., Ltd.)Japan
Setting the credit line
JBIC

Privatefinancial
institutions

Overseas
Loan
Futamura
ChemicalCo., Ltd.

Acquisition

British corporation

EUR
72 million

Innovia Films(Holding)
LimitedCases of JBIC’s support for cross-border M&A bylarge and mid-tier enterprises and SMEs
Suntory’s acquisition of Beam in the
US: First case of support for a large
cross-border M&A following JBIC’s
financing scheme
Suntory’s acquisition of Beam Inc. of the US, amanufacturer and seller of spirits, is a typicalexample of JBIC’s supports for cross-border
M&As. This huge acquisition amounted toapproximately USD 16 billion in the Japanese foodand beverage industry, and multiple financial
institutions including JBIC provided co-financing inJuly 2014. The total amount of JBIC’s financing
was approximately JPY 300 billion, of whichsome JPY 200 billion (JPY 50 billion and USD 1.5
billion) was financed by JBIC’s first subordinatedloan (hybrid loan) scheme. The subordinated loan
is a hybrid loan with characteristics between debt
and equity, and aims to quantitatively facilitate
the financing of huge amounts to supplement
private financing. It is also the first hybrid loan
denominated in US dollars ever issued in theJapanese market.
This acquisition allowed Suntory to become
the world’s third largest spirits manufacturer
and gain an excellent portfolio and know-how inthe world, with brands from the world’s fivelargest whisky markets: Scotland, Ireland, theUS, Canada and Japan. While the Japanese
alcohol market is expected to shrink as the
population declines and turns away fromalcohol, Suntory has successfully developed thebrewed beverage market worldwide, including
the U.S. where sales continue to increase.
This financing project is highly significant
because in cooperation with private financial
institutions, we provided a huge amount offinancing that propelled a Japanese company tothe third largest spirits manufacturer in the days
when supporting M&A by Japanese companies
is regarded as a national policy.

Increasing sales by introducing asystem to boost the morale of theacquired company
Beam Suntory Inc. (name after the acquisition)
has increased sales every year for the past three

years since the acquisition, and is now enjoying
stable achievement. In particular, after theacquisition Suntory positioned Suntory Beam’s
spirit business ABOVE Suntory’s own spirit
business in the corporate structure. Usually, an
acquired business is positioned lower down in
the new organizational system, but Suntory
boosted the morale and motivation of the
management of former Beam Inc. by placing
Beam Suntory Inc. higher up. In addition, all staff
led by President Niinami made a concerted effort
to support the new company, and both Suntory
and Beam Inc., companies with a history of morethan 100 years, respect each other’s history andculture. This is an important reason for the
success of Beam Suntory Inc.

Acquisition of British businessby Futamura Chemical Co., Ltd.:
Supporting cross-border M&As by
a mid-tier enterprise SME aiming tobe the leader of a niche market
Lately, there has been an increasing number ofcross-border M&A not only by large companies but
also by mid-tier enterprises and SMEs. In June
2016, for example, we financed the funds for theacquisition of the cellulose film business ofInnovia Films (Holding) Limited of Great Britain by
Futamura Chemical Co., Ltd., a SME withcapital of JPY 500 million, through private
financial institutions (total acquisition amount: EUR
72 million, JBIC’s portion: approximately USD 55
million). Futamura Chemical is a leading company
with the largest share in the production of cellulose
films used for packaging for foods and medicine
as well as for adhesive tapes. The company has
about a 30% share of the world market, but it has
never developed the European market. Therefore it
focused on the business of Innovia Films, aproducer and seller of cellulose films in Europe
and the US and has a 40% share of the world
market. In this case, we supported the strategic
investment of Futamura Chemical, which aims tobuild a global production and sales system, in
addition to gaining a customer base in Europe andthe U.S. with a long-term foreign-currencydenominated loan.

Takayuki Sato
Director
Division 1
Corporate Finance
Department
Industry Finance GroupAcquisition approach taken by
Japanese companies
These companies usually do not take anacquisition approach to increase profits promptly
by reducing the costs of the acquired company.
They spend a great deal of time to select anexcellent company, and then take much time toincrease synergies with the acquired companies
after acquisition. Many Japanese companies
seem to acquire a company through planned
action and to increase profits steadily throughwell-organized management. In this acquisition
approach, large companies tend to expand inforeign markets through M&A in accordance withthe strategy or medium-term plan, seeking
synergies. Meanwhile, mid-tier enterprises and
SMEs tend to gain production capacity and sales
channels from the target company through M&A
to complement for their weaknesses.
JBIC wishes to support Japanese companies
to conduct cross-Border M&As as part of their
growth strategies in the most suitable way, incooperation with private financial institutions. We
will continue to support them to develop foreign
markets by leveraging our strengths including
procuring foreign currency and providing longterm loans.

Press conference at the completion of acquisition ofBeam Inc. s stocks

December 2017 JBIC Today

5

Special Feature: M&A

Cross-border M&A : the Most Feasible Way for Japanese Companies to Grow

Special Interview

Nidec’s Strategic Business Portfolio Transformation;
Utilizing Cross-border M&A Opportunities in
Growing Markets for Electric Motors- Keys to successful M&A: fair price of acquisition, commitment to PMI process andassessment of long-term synergy effects -Akira Sato
Member of the Board of Directors,
Executive Vice President & Chief Financial Officer
Nidec Corporation

Using M&A effectively as a growth driver, Nidec Corporation(Nidec) continues to grow not only in the IT market but also inother growing markets, by expanding its product range in electric motors, from small precision motors to giant motors, andeven to modulized and applied products. In particular, since the2000’s, with an increase in the overall strength of its group companies, the company has steadily gained share in growing
markets by conducting M&A activities outside of Japan. We interviewed Akira Sato, Executive Vice President & Chief Financial
Officer, about Nidec’s M&A strategy and policy.

̶ Nidec has acquired 54 companies (as of theend of July 2017) in Japan and abroad. What is theunderlying strategy behind those M&A deals?

̶ What are M&A deals that you have recently
been involved?
▶Mr. Sato We have identified four key growth markets: (1) small▶Mr. Sato Our basic growth strategic aims are to grow organically by 50% and by another 50% through M&A activities. Fluid
dynamic bearing (FDB) motors installed in the hard disks of personal computers have driven our strong growth. However, wethought it was important to transform our business portfolio inorder to invest in businesses that will grow into a new earnings
pillar for sustainable growth in future. M&A is the best way to do
this as it can achieve great results in a short time. Amid various
new technologies that are developed and introduced, there is always demand for motors in growing markets. Motors consume
50–60% of the total electricity power generated worldwide. As
the evolving auto industry continues its trend towards electrification, for example, using motors instead of oil pressure for braking, electric motors will continue to be used in various fields infuture. To keep up with the trend of the electric motor market, we
actively use M&A as a means of sustaining our organic growth
momentum and constructing a new business portfolio.
6 December 2017 JBIC Today

precision motors, (2) Automotive motors, (3) motors for home appliance, commercial and industrial uses whose demand is expanding in growing economies, and (4) motors for robots. While theinternet is now spreading in our daily lives, we foresee considerable demand for motors because they are indispensable for developing Internet of Things (IoT) technologies, for example, the use of
motors for the joints of robots.
In the course of transforming our business portfolio according toour prospects for future business, we have received financing support from JBIC regarding four cross-border M&A deals. For example,
in 2012, we acquired an Italian company Ansaldo Sistemi Industriali
S.p.A..in which the solution business of energy storage systems withrenewable energy sources has been produced. This M&A deal aimed
to expand our product range of large industrial motors and electric
generators by taking over products manufactured by the Italian company. In the same year, we purchased an American company Kinetek
Group Inc. to gain a foothold in the commercial motor market. The
company was attractive for us because of their large global market

share in commercial and industrial motors used for elevators, escalators, and material handling vehicles.
Furthermore, we acquired the European motor drive and electric generator business from Emerson Electric (Emerson) in January 2017. Having lots of excellent customers mainly in North
America and Europe, Emerson is involved in a wide range of businesses besides manufacturing and selling electric and electronics
devices. By acquiring Emerson’s technologies and customer basesin the motor drive and electric generator business, we can expand
our product range of industrial motors. At the same time, instead of
selling motors by itself, we can also sell drives that run motors, as a
packaged product with the motors. In this sense, this M&A helped
us achieve vertical integration and become a solution provider inthe field of industrial motors. As demonstrated by these cases, thefocus of our M&A strategies is shifting from merely obtaining technologies and sales channels from acquired companies.

way, Nidec’s spirit “Do it now; do it without hesitation; do it until
completed” becomes deeply rooted in their minds.
The third basic principle is to thoroughly assess synergy effects
through M&A when identifying companies targeted for M&A. We
never select candidate companies in business areas that are notrelated to motors. We focus on companies in business areas close
to the motor business. Company selection is not permitted without
performing in-depth analysis of synergy effects. We move towards
accomplishing our business vision and objectives by conducting
M&A activities, with an emphasis on long-term synergy effects, as
if putting together pieces of the jigsaw puzzle.
Under such direction, a system to push forward M&A strategies was internally established. As a result, we have achieved
the desired results in all M&A cases where we were involved.
Among companies that we bought, none of them has brought
an impairment loss to Nidec group so far.

̶What are the key factors you consider important
based on M&A experiences of Nidec to achieve
successful M&A deals?

̶ Please tell us your views and expectationsof JBIC.
▶Mr. Sato It is essential for Japanese companies to raise foreign▶Mr. Sato We have three basic principles for M&A. The first principle
is to buy at an appropriate price, not buying at a higher price. We neverapproach a company that does not satisfy our internal criteria for M&A
targets. We clarify what we need for our growth strategy before starting
to look for candidate companies. Then, staff members in our M&A department identify about 20 companies that look attractive to approach,without support from an M&A intermediary company. When we approach a target company at a very early stage, they often refuse to negotiate with us about selling their businesses. As time goes by,
however, their situation and strategic direction may change and they
start to look for a buyer to purchase the businesses outside their corecompetence. Then, they approach us for discussions about selling
their businesses because we have already contacted them in the past.
This brings us an opportunity to negotiate with them about the sale oftheir businesses and agree to acquire at an appropriate price. I believethat the success of M&A is dependent on not only the acquisition price
but also whether or not: i) the acquired company can find the strategic
value of M&A and ii) they expect us to grow their businesses. To put theacquired company on a growth path, we set a clear profit target tostrictly manage their businesses from the first year after acquisition.
The second basic principle is to successfully complete thepost-merger integration (PMI) process (Note). We spend much timeand effort to perform the PMI process by involving heads of business units such as Automotive and Home appliance, etc. in the processes from due diligence to management after acquisition. During
the PMI process, the heads who know most about the businesses
solve issues with employees of an acquired company. In the courseof such efforts, the managers communicate with the staff membersof the acquired company about our willingness to invest money required for future business growth, while encouraging each of themto consider what is necessary for the company’s growth. In thiscurrency funds when they conduct cross-border M&A, but theysometimes face limitations in steadily securing foreign currencies
only from private-sector financial institutions. In this respect, JBIC,
as a policy-based financial institution, plays a very important role insupplementing ordinary transactions performed by private-sector
financial institution. We expect JBIC to continue to support thelong-term supply of funds in foreign currencies on a stable basis.
There are some countries and regions that are less familiar to us but possess the potential of great business opportunities. Against this backdrop, we expect JBIC with close ties
with many foreign countries to continue to provide us withinformation that we cannot gain from the private sector, including the political and economic trends in foreign countries and associated risk factors. I believe that those
information and knowledge about the foreign situation will
help Japanese companies to expand or start businesses outside of Japan without fear.
Note: PMI: Abbreviation of post-merger integration, which means theintegration process after an M&A agreement is concluded.

December 2017 JBIC Today

7

Our Global
Challenges

Farmdo Corp. (Maebashi City, Gunma Prefecture)

Solar Farm Business :Shaping the Future of World Agriculture– Farmdo’s efforts for farming business and solar power generation in Mongolia

With its corporate philosophy “Support agriculture; Make efforts towards an increase in farmers’ incomes”, Farmdo Corp. (“Farmdo”), an SME company that assists Japan’s farmers and supports the country’s agriculture sector, promotes the so-called Sixth
Industrialization of Agriculture (Note 1) that aims to integrate the activities of sectors in the agricultural industry value chain fromproduction to processing and sales. Having started the solar power business especially in Gunma Prefecture, the company also
invests in the “solar farm business” to generate solar power on a farming land while growing crops, which is a new form of agriculture. The company has installed solar panels at about 100 places in Japan, which generate a total power capacity of 56,000 kW,
including the power capacity generated through solar panels installed on farm lands where crops are not grown. Farmdo started its
business in Mongolia in 2012 and Myanmar in 2013. In the fall of 2017, the company will launch a solar farm business in Mongoliausing the accumulated know-how on the business in Japan, with an aim to: i) assist Mongolia in achieving its target for renewableenergy capacity and ii) provide fresh and safe agricultural products which are expected to see increased demand in the country.

Understanding the needs offarmers through sales by truck
Mr. Masayuki Iwai, President ofFarmdo, recalled, “Since my early 30s,
when I was working for a leading distribution company, I had planned torun my own business in the future.
When I opened a store to sell agricultural materials, I had the idea of building a “department store for farmers”
that sells seeds, fertilizers and agricultural machinery. This idea led me tothe current business.”
Mr. Iwai continued to say, “Backthen, farmers purchased agricultural
machinery and materials, such as fertilizers, from Japan Agricultural Cooperatives (“JA”) and also sold all
agricultural products to JA. Under such
distribution system, farmers have limited access to the source of information
about consumers’ needs, so I thought I
could create a new business by establishing new distribution channels (direct sales system) without using thenormal circulation markets, which
would directly bring in more incomes

8 December 2017 JBIC Todayand information about consumers’
needs to farmers”. Based on this strong
belief, Mr. Iwai established Farmland
Corp., the former company of Farmdo,
in 1994. Unfortunately, the launch of his
company was delayed by 10 months because the site where he planned to dobusiness became subject to land use restrictions. Facing the serious situation
without any income, he decided to drivea sales truck loaded with agricultural
materials. “This decision turned out tobe very successful. I could understandthe needs of farmers by directly talking
with them,” Mr. Iwai recounted. He
traveled across the country, purchasing
as many as 20,000 agricultural products
and pricing them one by one by himself.
As a result, he earned the support offarmers and doubled sales in the second
year. In the third year, he obtained a license of an agricultural production corporation and founded another company
called Farm Club as a private limited
company. This enabled him to start abusiness to produce and sell vegetableseedlings. The turning point came about
10 years after foundation. Farmdo was ina slump due to competition and the declining number of farmers. Mr. Iwai
said, “To overcome the slump, I decided
to sell fresh vegetables that had sustained
steady sales. To satisfy the needs of customers who wish to eat fresh vegetables,
I built “Shoku no Eki” shops as a sales
network of agricultural products thatconnects farmers and consumers. This
market-in idea became popular with
consumers and also welcomed by farmers because it allows them to secure sales
channels. This idea was a hit, and sales
increased by 2.2 times year-on-year”.

Launching the solar power generation business and developing
foreign markets
Thereafter, sales continued to increasesteadily, which formed a foundation towards the Sixth Industrialization of Agriculture. However, the reputation ofvegetables produced in Gunma was hit
by the Great East Japan Earthquake in2011, which significantly dragged down
sales of vegetables. Furthermore, thegasoline shortages after the earthquake

Solar panels under construction (Mongolia)

significantly hurt the household incomes of farmers. While finding a way
to enable farmers to secure a source ofincome, Mr. Iwai conceived the idea ofgaining an income by selling electricity
generated through solar panels installedon the roofs of plastic greenhouses.
Based on this idea, he acquired fallow
land and started a solar farm business in2013 to generate solar power on an agricultural land while growing crops in aplastic greenhouse. Supported by a government’s program to purchase renewable energy at a fixed price that started
in the previous year, the solar farm business expanded further to install solar
panels at about 70 places across Japan.
This paved the way to further expand
the solar farm business into Mongolia.
Mr. Iwai explained, “Farmdo established a joint-venture company, Everyday
Farm LLC (EDF), with a local Mongolian
company in 2012. I focused on Mongolia
because local eating habits are diversified
especially in urban areas, and the demand
for fresh and safe vegetables is growing
and is expected to continue to grow”.
In addition, air pollution in the city of
Ulaanbaatar in Mongolia is worsening
and the city is implementing various
measures to cut air pollution, including
the use of renewable energy sources. As
this project is expected to spread innovative low carbon technologies in Mongolia,
it is accepted as one of the projects thatis supported under the joint crediting
mechanism (JCM) (Note 2) program led
by Ministry of the Environment,
Government of Japan. In Mongolia
where a vast agricultural land is available, Farmdo can fully utilize its knowhow in the solar farm business which
produces stable income by selling electricity generated through solar panels installed on farming land while growing
crops there in more efficient way by adjusting sunlight. “Needless to say it was
important to earn the trust in our solar
farm technology from Mongolia, but it
was also important to make our own efforts to build relationships of trust withlocal people. As a result of these efforts,
we developed deep relationships with thelocal administrative chief and receive encouraging support from him”, said Mr.
Iwai, with a smile.

Relationshipwith JBIC

Vegetables sold at stands along a trunk road (Mongolia)

Focusing on educating young
people to build the future ofJapan’s agriculture
Now, Farmdo plans to expand the solar
farm business more broadly in Asianemerging countries. At the same time,
the company is making efforts to create
the future of Japan’s farming industry,
particularly together with the next generation of young people. Mr. Iwai said,“we are planning to introduce and practice the Japanese version of the dual system (Note 3) in agriculture in partnershipwith local universities beginning in fiscal
2018. This system is intended to develop
human resources who will contribute to
the world in the agriculture industry, providing courses of lectures and training forboth the Sixth Industrialization of Agriculture and agricultural production. We
hope that agriculture will be a growing
industry in 10 years. To realize our hopes,
we believe that our mission is to develop
young people who will support the future
farming industry and overseas agricultural businesses, and to proactively create
new ways of farming”. In April 2017,
Farmdo recruited 17 young members of
staﬀ, the largest number since the company was established. The company continues to move forward to further increase
the potential of Japan’s farming industry.

Masayuki Iwai
President
Farmdo Corporation

Company Profile
Note 1: Sixth Industrialization of Agriculture
Integration from the upstream to downstream of the
agriculture industry, by combining its primary sector(agricultural production), secondary sector (processing)and tertiary sector (distribution and sales). The term
“Sixth Industrialization of Agriculture” is an invented term,in which “Sixth” is derived by summing the numbers, 1 forprimary industry, 2 for secondary industry, and 3 fortertiary industry.
Note 2: Joint crediting mechanism (JCM)
A n initiative of Japanese government aimed at
qu a n t i t a t i v e l y evaluat ing J a pan's c ont r ibu t ion to
curbing greenhouse gas emissions by providing
Japanese emission reduction technologies, products,
systems, services and infrastructure to developing
countries and taking account of the above quantified
contribution as a par t of achievement towards
Japan's own target for emission reduction.
Note 3: Dual system
A practical vocational training system that combines
on-the-job (OJT) training programs, and educationaland vocational training courses.

Name

Farmdo Corporation

Established1994

Capital98 million yen (as of March 2016)

President

Masayuki Iwai

Business
lines

Sales of agricultural materials,
agricultural products, processed
specialty products and electricity
generated by photovoltaic generation

Headquarters 3rd floor, NF2 Bldg., 1-1-1
Tonyamachi, Maebashi-shi, Gunma Pref.
Shops

Six “Noen’s” shops in Gunma
Prefecture, 12 “Shoku no Eki” shops
mainly in the northern Kanto region,and 14 “Local production Marché”
shops mainly in Tokyo, and a farmrestaurant “Saino Saien” in Saitama
Prefecture

Overseas
bases

Everyday Farm LLC (Mongolia)
Five Stars Food Industry Co. Ltd.
(Myanmar)

In March 2017, JBIC signed a loan agreement with Everyday Farm LLC (EDF), the Mongolian subsidiary of Farmdo,
under a co-financing arrangement with Towa Bank, Ltd. for the amount up to USD 12.1 million equivallent, of which
JBIC will provide up to USD 8.5 million. This financing is to provide capital necessary for the solar power generation
project conducted by EDF in Ulaanbaatar, Mongolia. EDF will sell electricity to Mongolian National Transmission andDistribution Company for the next two decades.

December 2017 JBIC Today

9Behind the scenes of media coverageNews in Depth

Buyer’s Credit for Government of Argentina Supporting Export ofAutomatic Train Stop System by Japanese Companies

Towards Stronger Relations with Argentina;
Financing Export of Japan’s
Railway Technology〜 Second project under the newly established “Special Operations” 〜

The Japan Bank for International Cooperation (JBIC; Governor: Akira Kondoh) signed on May 19 a loan agreement on buyer’s credit (export loan) with
the Government of the Argentine Republic (Argentina). The loan is cofinanced with the Tokyo Branch of Deutsche Bank AG, with Nippon Export andInvestment Insurance (NEXI) providing insurance for the portion cofinancedby this private-sector bank.
This loan is intended to finance the purchase of a set of railway signal
systems from Marubeni Corporation in order for State Company of Administration of Railway Infrastructure (Administración de Infraestructuras Ferroviárias Sociedad del Estado) to carry out installation of automatic railway
stop systems for eight Buenos Aires suburban rail lines. NIPPON SIGNAL
CO, LTD. will manufacture the railway signal systems.
In Argentina, the Macri administration, inaugurated in December 2015,

took measures toward economic reform and brought the country back to theinternational financial market. At the same time, the government announced
the infrastructure development plan, and is considering to invite foreign investment and to renew facilities in the infrastructure sectors such as therailway. In response to this initiative, Japanese companies aim to capture
the opportunities to export their products to the Argentine infrastructure industry. Amid such circumstances, this loan will contribute to improving thesafety of the Argentine railway sector by introducing quality infrastructure,
as well as contribute to maintaining and strengthening the international
competitiveness of Japanese industries. Furthermore, this agreement wasmade mention of at the Japan-Argentina Summit Meeting held on May 19 of
this year, and is thus anticipated to further enhance the relationship between the two counties.
* Press release of JBIC, May 22, 2017

After declaring default in 2001 and overcoming economic stagnation, the Argentine Republic returned to the international
financial market for the first time in many years, after President Mauricio Macri took office in December 2015. Although notwidely known, Japan and Argentina have a long history of mutual relations. For example, Japan studied the railway system in
Buenos Aires, the capital of Argentina, when constructing its first subway in the early 20th century.
Though geographically far away, Argentina is on close terms with Japan. Taking the opportunity of President Macri’s visit
to Japan in May 2017, JBIC decided to financially support the export of Japanese automatic railway stop system to Argentina
as a business bridge between the two countries. The staff in charge of the project explained aspects of this project behindthe press coverage.
An article related to this project was published in the morning edition of The Yomiuri Shimbun on May 21, 2017.

—Firstly, please give us an overview of Argentina andthe background of the decision on this financing
Yasaka It may not be easy for Japanese to imagine Argentina because Argentina and Japan are located on the opposite side of the
globe. Argentina used to be an economically advanced country.
However, affected by the Brazilian financial crisis, Argentina’s economy worsened in 2001. As a result, the Argentine government declared the suspension of foreign debt repayments, which deteriorated the economic relations between Argentina and Westerncountries or Japan.
After starting in December 2015, the Macri administration pursued an economic liberalization policy, resulting in bringing Argentina back to the international financial world. At the same time,
the administration formulated an infrastructure improvement planand started to consider drawing in foreign capital. This led Japanese companies to consider the entry into the infrastructure business in Argentina.
Japan and Argentina have strong relationships in the railway business, as evidenced by the following two historicalfacts: i) the Ginza Line, Japan’s first subway line, was built
based on the railway technology of the subway in Buenos Aires, and ii) Japanese companies contributed to the Argentine
railway modernization project in the 1980s. This business opportunity to export Japanese infrastructure to Argentina hasarisen as a result of the long history of relations in the railway
sector between the two countries.
However, Argentina faced a difficulty when they tried to obtainfunding from private-sector financial institutions, because the country has just returned to the international financial market. Under
such circumstances, JBIC has approved a loan to finance the exportof Japan’s infrastructure to Argentina through the newly launched“Special Operations (Note 1)”, in order to realize the business opportunity for exporting Japan’s high-quality infrastructure.
10 December 2017 JBIC Today

billion yen equivalent) in transportation infrastructure for the four
years from 2016 to 2019. This project is included in the government’s infrastructure plan. The train lines to be covered by this project
are important because commuters in the capital region use those train
lines. However, due to the delay in capital investment, maintenancework has not been performed for railway equipment. As a result, train
accidents were caused by failures of train brakes in 2011 and 2012.
This became a social problem. In response to these train accidents,
the government worked hard in finding a way to increase the railway
safety, such as installation of an automatic train stop (ATS) system (Note 2) .
Another reason for the launch of this project is because of Japanese companies’contribution to the railway sector of Argentina over
the years by providing high-quality railway technologies. For example,
when Argentina started a plan to electrify railways on a large scale inthe 1980’
s, Japanese companies, including Marubeni Corporation
and Nippon Signal Co., Ltd., participated in the plan. Furthermore,even at a phase when the Argentine economy stagnated and foreign
investment decreased, Japanese companies continued receiving orders for railway infrastructure maintenance for 30 years. Thanks tothese maintenance works, there has been no accident caused by therailway technology from Japan. Argentina highly evaluated the highquality Japanese railway technology. Their trust in the Japanese technology has led to launching this project.

—JBIC started the Special Operations in October
2016. This railway project is the second project that
JBIC approved to finance under the Special Operations, following the financing to the Iraqi government
in March 2017.

Takayuki Yasaka

Deputy Director General and Director
Division 1
Mining and Metals Finance Department
Energy and Natural Resources Finance Group

Soichiro Morimoto(then) Division 1
Mining and Metals Finance Department
Energy and Natural Resources Finance Group

This is the first JBIC loan to be offered to Argentina after Paris Club
creditors and Argentina agreed in 2014 on a debt-relief arrangement.
At the same time, this loan to Argentina is the first loan to be provided
by JBIC in 20 years. Prime Minister Shinzo Abe visited Argentina in November 2016, the first Japanese prime minister to do so in 54 years,
and during his visit, Argentina expressed strong expectations for Japanese companies’participation in infrastructure development of Argentina including the railway sector. Japan also announced its policy toactively utilize JBIC and other government agencies for such purposes.
We view this project as helping to strengthen economic relations between Japan and Argentina.

—Please tell us about the background of this project inmore detail.
Morimoto There has not been much investment in the railways inthe suburbs of Argentina’s capital for the last 30 years, but the Macriadministration announced a plan to invest 1 billion US Dollars (100Morimoto We made efforts to build a close relationship with theArgentine government that allows us to have direct talks with themregarding the progress in economic reform, such as fiscal consolidation under the Macri administration and the macroeconomic conditions. Besides, we discussed with related parties both inside andoutside of JBIC regarding how to respond to political and economic
risks. Through these efforts, we finally determined to provide financing to this project. Going forward, we will continue to smoothly implement the Special Operations through policy dialogues with foreign governments as demonstrated by this project.

—Do you think Argentina will become an attractive
business target for Japanese companies?
Yasaka Argentina is rich in resources like energy, minerals andfoods. With little investment in infrastructure for many years, Argentina
has high expectations for investment and technology of Japanese companies. The speed at which Japanese companies will grow their businesses in Argentina may vary according to sector. Some sectors mightplan to make large and long-term investments from the beginning ofentering into the Argentine market, while other sectors might see medium-term investments in a phased manner, after first being involred in
the export business to Argentina. I believe that Argentina has a potential
to become an attractive business target for Japanese companies. Furthermore, as Argentina is a member of Mercosur, Japanese companies
seem to position Argentina as a base for expanding their businesses toother South American countries, such as export business. We think thisproject has great significance in that we supported the business expansion of Japanese companies under the newly established Special Operations. We would like to encourage Japanese companies to expand
or start their businesses in Argentine and other new markets in cooperation with private-sector financial institutions.
Note 1: Special Operations: Newly-launched operations that enable JBIC to finance overseas
infrastructure projects with risks that are new to JBIC, for further encouraging Japanesecompanies to participate in overseas infrastructure business. The Special Operations started
on October 1, 2016 with the enforcement of the Act for Partial Amendment of the Japan
Bank for International Cooperation Act.
Note 2: Automatic Train Stop: Train protection device that automatically controls the braking
system to stop the train right before a railway signal.

Voice from JBIC’s Overseas Representative OfficeThis is my third time to work in JBIC’s overseas
representative office in Buenos Aires. When it
comes to the news about Argentina reported inJapan for the last 20 years, unfortunately wehave heard much negative news focusing on thefinancial crisis. However, from my experience
after nine years of living here, the city always
looks lively and energetic, and at least, general
economic activities appear to have remained vi- Masahito Suzuki
Chief Representative
brant. For example, electric consumption has Overseas Representative
been increasing every year since 1990.
Office in Buenos Aires
In reality, however, most sectors in Argentina suffered from supply shortages because they faced the difficulty in gaining access to funding due to the issue of Argentina’s debt in arrears. Despite the strong demand for electricity,
power generating capacity hardly increased, which resulted infrequently causing blackouts in the city. Public transportation
services were interrupted by railway technological problems
arising from the use of deteriorated equipment. There was also
a fuel gas supply shortfall and companies had no choice but toimport expensive LNG. These situations really made me feel uneasy when I worked here the last two times.
Nevertheless, Argentina has now taken a new step forward with
an improvement in the funding environment. The demand and supply gap arising from supply shortfall turns into business opportunities. In this sense, Argentina has a great potential of businessgrowth. I would like to support Japanese companies who seekbusiness opportunities in Argentina, by proactively communicating
the local information and attractiveness of the country.
Some people regard Argentina as a country that used to beadvanced, but personally I would say that Argentina is still aculturally super-advanced country when I see local youths enjoying the piano performance by Daniel Barenboim, a native of
Buenos Aires, in Teatro Colon, which is one of the world’s
three major opera houses.

December 2017 JBIC Today

11