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To: PaulM who wrote (28046)	2/11/1999 8:46:00 PM
From: Hawkmoon	Respond to of 116753

Paul, Strategic Oil Reserve rationale #2 (other than subsidizing stripper well production...) Y2K.

To: PaulM who wrote (28046)	2/12/1999 8:56:00 PM
From: goldsnow	Read Replies (1) \| Respond to of 116753

'Gaijin' splash out on Japan By Andrew Cornell, Tokyo Foreigners, "gaijin", spent $US6.91 billion ($10.72 billion) buying Japanese corporate assets in 1998, according to KPMG Corporate Finance, six times the value of deals in 1997. But that figure could triple in 1999 as corporate restructuring gathers pace and regulatory change opens the gates to foreign raiders. Merger and acquisition activity is also growing as Japanese companies, under siege from the forces of recession, circle the wagons, belatedly recognising that one response to inefficient companies and over-capacity is rationalisation. Total deals involving Japanese companies also hit a new record in 1998, rising to 908 from 237, with the average value climbing to ¥9.8 billion ($133.04 million) from ¥4.5 billion, according to Nikko Securities. Again, 1999 is expected to top that record. Already this year, GE Capital set a record picking up $US6.5 billion of distressed leasing assets from the failed Long Term Credit Bank; Sumitomo cemented an alliance with Goodyear creating the world's biggest tyre company; and Mitsubishi Electric and Toshiba merged their electrical generator businesses. The list goes on: convenience stores Circle K Japan and Sunkus will merge, as will Mitsubishi Chemical and Tokyo Tanabe, along with the resin operations of Sumitomo Chemical and Mitsui Chemical. For foreign predators, the attraction is obvious. They have long hankered to get into the world's second-largest economy but before Japan's crisis the market was closed. "International companies are taking larger stakes in Japan because of government reforms and deregulation in several industries and Japanese companies' divestiture of non-performing business units," said KPMG's Mr Hiroaki Yoshihara. "These companies want to get a foothold in Japan so they can penetrate the world's second-largest market more effectively as policy changes are made." GE Capital plans to lift the contribution of Japan to earnings from 1 per cent to 10 per cent in less than three years. "Japan is clearly the single largest opportunity for us right now," said GE Capital's president, Mr Denis Nayden. Along with the M&A activity come the merchant banks. In the central business district, restaurants are full of carpet-bagging bankers, expatriate accommodation is tight. Japan is not just a great opportunity, it is an under-developed M&A market. Japanese companies have not traditionally grown by acquisition but by cementing alliances with rivals and customers through cross-shareholdings. Cross-shareholdings represent around one-third of stock supply on the Nikkei Index. Not only do they bind an alliance, trade and particularly upward revaluations of these shareholdings have boosted the core business performance of companies holding them. Those cross-shareholdings are also, slowly, being unravelled. Not only because they distort the market or lead to inefficient capital allocation but also because the Nikkei's lamentable performance has made them a liability. The inexperience of Japanese companies in M&A leads some analysts to conclude the deals will be rushed, not properly thought out and hence will fail -- or at least not be as successful as they could be. In financial services, where much of the activity has been concentrated, an ING Barings analyst, Mr James Fiorillo, has identified three merger patterns which he says are "clearly lacking in strategic vision". They are the "unity of group" approach where companies allied in keiretsu, or corporate families, formalise ties through greater cross-shareholdings; the "tie-up to transform" approach where alliances are formed with institutions from another industry to open new markets -- for example, a retail bank with a retailer; and the "weak bank cluster" approach where struggling institutions band together in the hope that a few weak can make one strong. "The main goal of consolidation is still a reduction in loan capacity, not a reduction in the number of firms. On this front, the current initiatives seem to achieve little or no progress," Mr Fiorillo said. afr.com.au