Japan MS&AD buying NY Life's India JV stake for $540m

Japan's MS&AD is set to buy New York Life's 26% stake in a joint venture with Max India for about USD 540 million, two sources said on Thursday, signaling the continued appetite of Japanese companies for overseas assets.

MS&AD Insurance Group, Japan's largest property-casualty insurer by revenue, is among the industry's most aggressive in expanding in Asia through acquisitions, buying both life and non-life assets to secure growth beyond the weak home market. A year ago, it bought a 50% stake in Indonesia's PT Asuransi Jiwa Sinarmas for about 67 billion yen. Now, one of its core units, Mitsui Sumitomo Insurance, is striking a deal with Max New York Life, India's largest non-banking private insurance company, for about Rs 2,800 crore, said the sources, who were not authorised to discuss the matter publicly. One source said the deal would be all cash. The deal would represent a further withdrawal from Asia for New York Life, which recently sold businesses in China, Thailand, South Korea and Hong Kong. Max India said in a press release on Thursday afternoon that, subject to approvals, Mitsui Sumitomo would be acquiring New York Life's 26% Indian joint venture stake. Max India also called a press conference in New Delhi for Thursday afternoon without specifying an agenda. Mitsui Sumitomo's president is in India to attend the conference, one of the sources said. Despite the large size of the Japanese economy there is little growth in its domestic market. That, combined with low interest rates and a strong yen, has pushed Japanese companies to aggressively buy up overseas assets. Japan's outbound M&A activity has ramped up sharply over the past two years. In 2010 Japan's outbound deals including debt totaled USD 38.3 billion, making it the eighth most active country for overseas M&A, according to Thomson Reuters data. In 2011 Japan became the third most active country with deals totaling USD 69.7 billion, an increase of 82%. And so far this year Japan's outbound deals have totaled USD 18.1 billion, leaving it with a No. 3 ranking, behind the United States and Switzerland. On Thursday, Japan's Nidec Corp, a leading maker of micro motors used in electronic devices, said it will buy Italian industrial motor maker Ansaldo Sistemi Industrial SpA. RUSHING OVERSEAS Japan's insurers have been particularly aggressive in overseas acquisitions. Tokio Marine, taking advantage of its stronger financial firepower, has been bagging bigger and more expensive deals in Europe and the United States, including a USD 2.7 billion acquisition of US insurer Delphi Financial Group. Nippon Life last year said it would buy a 26% stake in India's Reliance Life Insurance for USD 680 million and in January also said it would purchase a stake in a fund management unit of Reliance Capital Ltd. And Meiji Yasuda Life Insurance Co, Japan's No. 2 life insurer, said in January it wanted to do deals, and was planning to acquire one or two overseas companies in emerging economies this year. Despite Japanese insurers' hunger for overseas acquisitions and the fact that there are several assets up for sale, industry executives say many prospective deals are unattractive and too expensive. Cheap borrowing and a strong currency make it easier for Japanese buyers to pay higher prices but there is some concern about paying too much. MS&AD was criticized for overpaying for Sinarmas and that has put pressure on the amount that Japanese insurers are willing to spend, M&A bankers have said. There are also concerns that huge losses from Thailand's flood damage coverage could have sapped Japanese insurers' M&A war chests. In February, MS&AD said it expects a net loss of 145 billion yen for the year ended in March, hurt by more than 200 billion yen payment for Thai flood losses. Citigroup Inc is advising MS&AD on the India deal, one of the sources said. An MS&AD spokesman said nothing has been decided and declined to elaborate further. A spokesman for Citi declined to comment. MS&AD shares were down 1.02% in mid-afternoon trading. Max India shares were up 5.84%.