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Tuesday, 08 November 2011 |
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 Fast Retailing Co., Asia’s largest clothing chain, may buy a bigger rival in the U.S. or Europe to make the most of the yen’s advance, which reached a postwar high against the dollar and boosted the Japanese company’s purchasing power.
CEO Tadashi Yanai is keen to acquire a "company of equal size or bigger".
“The yen strength and anemic stock markets make this a very good opportunity for merger and acquisition (M&A),” Chief Executive Officer Tadashi Yanai, 62, said in a Nov. 4 interview in Tokyo. “It won’t be something small, but a company of equal size or bigger.” The yen on Oct. 31 hit a post-World War II high of 75.35 against the dollar before the government intervened in the currency markets. The Japanese currency traded at 78.24 to the dollar on Nov. 4. Fast Retailing had 202 billion yen in cash and short- term investments in August, the highest level since at least 2002, according to data compiled by Bloomberg.
“If there is a chance to do M&A in the future, we’re thinking of doing it,” said Yanai, who turned his father’s tailoring business into a company with a market value of 1.4 trillion yen, making him Japan’s second-richest person. Yanai, the billionaire behind the the Uniqlo’s parent group, aims to take advantage of the yen’s climb to expand outside Japan, where an unexpectedly
long summer damped demand for fall and winter clothing,
contributing to a 12 percent decline in profit in the year through
August.
Fast Retailing, the second-biggest gainer on the Nikkei 225 Stock Average in the past five years, has gained about 26 percent in the past five years. In dollar terms, its market value has soared 90 percent. The stock fell 0.2 percent to 13,390 yen as of the 3 p.m. close of trading in Tokyo, paring its advance this year to 2.8 percent, compared with a 14 percent drop for the Nikkei 225 and a 17 percent slide for the broader Topix index. However, Yanai said the company may also list overseas “since the Japanese equity market lacks growth.” He didn’t give a timeframe for any share sales.
“The fact that they are starting to talk about M&A means that they see their U.S. expansion as a success and have a clearer picture on future development,” said Mikihiko Yamato, a research partner at JI Asia. “It is a positive sign.” Fast Retailing has said it intends to boost overseas sales to be greater than domestic revenue by 2015 as it expands in China, Southeast Asia and the U.S., competing with Inditex’ s Zara, Hennes & Mauritz, and Gap Inc. Sales at Uniqlo stores in Japan that have been open more than a year dropped for a third straight month in October.
Making purchases was one of the ways the company was “investing for the future,” Yanai said in September. He remains Fast Retailing’s biggest shareholder with a 22 percent stake, according to data compiled by Bloomberg. Fast Retailing opened two New York stores last month and aims to be the world’s top clothing retailer, targeting a six fold jump in sales from last year to 5 trillion yen ($64 billion) by 2020. “Listing in the U.S. may be good for doing a certain amount of business there,” he said. “It may also be good to list in Hong Kong or Singapore.”
Fast Retailing has spent more than $875 million on 22 deals since 2003, according to data compiled by Bloomberg. It acquired a stake in Nelson Finance, owner of the French brand Comptoir des Cotonniers, in 2005, according to its 2010 annual report. Fast Retailing bought a further 64 percent in the company for $192.5 million in 2006, according to data compiled by Bloomberg. It is worthy a note to remember that the company bought out apparel maker Link Theory in two transactions in 2009 for $371 million after purchasing a minority stake in 2004, according to data compiled by Bloomberg, that points out it is Fast Retailing’s biggest acquisition to date.
AngelaGonzález-Rodríguez
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