Japan finance firm set to buy Robeco

Japanese finance specialist moves to buy Robeco

Orix Corporation has agreed to acquire 90% of the equity in Robeco from Rabobank for $2.5 billion. It says it intends to keep the Dutch asset manager intact as much as possible.
At six-seven times Ebitda, Orix believes it has a bargain purchase
At six-seven times Ebitda, Orix believes it has a bargain purchase

Japanese financial services group Orix Corporation has moved to acquire 90% of the equity in Robeco from Rabobank for €1.9 billion ($2.5 billion), and says it will continue to expand.

Subject to legal and regulatory approvals, the deal is expected to be completed within six months. It is valued at an estimated six-seven times Ebitda, which is understood to be lower than many of the competitor deals it examined.

Orix stresses that Robeco’s management board will remain in their current roles, with Roderick Munsters continuing as CEO and now reporting to Orix headquarters in Tokyo. It says it wants to retain as many of Robeco's estimated 1,500 staff as possible.

Robeco Group’s legal structure will remain unchanged, as will the current governance and reporting lines from Robeco’s subsidiaries, according to an acquisition statement.

Part of the agreement sees a strategic alliance between the seller, Rabobank, and the buyer, Orix, in which Rabobank will retain a 9.99% stake in Robeco and cooperate in maintaining and expanding the Dutch asset manager’s platform.

Meawnhile, Orix will allocate treasury stock to Rabobank as part of the acquisition price, meaning that Rabobank will become an Orix shareholder.

The one part of Robeco’s business that Orix is not acquiring is its banking activities, which are only based in the Netherlands. These will be transferred to Rabobank, with Robeco retaining its client service relations.

In the statement, Orix noted that the financial market had changed drastically since the financial crisis and that it believed it is necessary to pursue a new business model of financing plus related services.

Orix started as a leasing company in 1964 and has since diversified into banking, life insurance and loans, amongst other things. It acquired an $11.7 billion fixed income-focused hedge fund in the US called Mariner two years ago. It also invests in real estate and Reits.

It has a presence in 27 countries outside of Japan, predominantly in Asia, and has an estimated staff of 10,000 in Japan, and 8,000 ex-Japan.

In terms of rationale for the deal, Orix lists Robeco’s global brand, diversified range of businesses across asset classes and regions, breadth of  global distribution and experienced investment teams.

“As a well managed and relatively autonomous group of businesses with a good performance record, Robeco is the ideal vehicle for Orix to pursue its ambitions in global asset management,” the statement reads.

“Growth opportunities also exist in the pension and asset management markets in Asia and the Middle East, where Orix has an established network.”

Robeco saw its AUM increase by 26% to €189 billion as at the end of December 2012. It recorded net new assets of €18.4 billion, while net profit increased 47% to €197 million.

In terms of investment performance, 65% of Robeco’s assets outperformed their benchmarks, according to the statement.

“The management team has displayed tremendous performance over the years and we are confident that they will continue to accomplish this going forward,” says Yoshihiko Miyauchi, chief executive of Orix Group.

"Orix will pursue further expansion in Europe and the US, as well as growth in Asia and Middle East regions.”

Goldman Sachs advised Orix, J.P. Morgan advised Robeco and Barclays advised Rabobank.

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