Write-up of Japan Achievement Awards 2008, day 2

Here are the details of our Japan Deal Awards for 2008, which were announced in February. A write-up of our House Awards was published yesterday.

Takeda Pharmaceutical's $8.5 billion acquisition of the US's Millennium Pharmaceuticals
Acquirer adviser: UBS Investment Bank
Target adviser: Goldman Sachs

This was a deal which simply ticked all the right boxes in a very complete manner. It was the biggest deal of the year, it made excellent strategic sense and it was flawlessly executed. It also makes sense for the deal of the year to come from the pharmaceutical sector this year, as this sector saw the greatest level of cross-border activity. This deal enables an industry-leading Japanese company (Takeda) to widen its expertise to include anti-cancer drugs, an area of special expertise at Millennium. The acquisition is extremely complementary to Takeda's core business in Japan and will be of clear benefit to shareholders.

Seven Bank's $486 million IPO
Lead managers: Morgan Stanley, Nikko Citigroup, Nomura.

Seven Bank was the largest offering out of the Japanese IPO market last year, and it was a deal worth waiting for -- the biggest since the IPO of Sony Financial in October 2007. The marketing was excellent, with the leads emphasising that the company was not in fact a bank in the normal sense of the world: it is actually an ATM servicing company. Given the poor sentiment prevailing at the time towards financial institutions, the approach made absolute sense. Execution was spotless with the retail and institutional tranches both heavily oversubscribed. The icing on the cake was the fact that the stock traded up in the secondary market -- at a very difficult time for the stock market. It's a pity there weren't more deals just like it.

Mitsubishi UFJ Financial Group's $4.5 billion follow-on
Lead managers: J.P. Morgan, Mitsubishi UFJ Securities, Morgan Stanley, Nomura.

This was an incredible transaction by any standards: the biggest follow-on of the year, it enabled MUFG to obtain essential capital at an extremely difficult time for the banking sector. It also helped to lay the basis for the group's acquisition of a path-breaking 22% stake in Morgan Stanley. Interestingly, the deal was also successfully marketed to US retail investors. Since this deal, it has become clear that the banks which did not tap the markets early will suffer for it, so credit to MUFG for getting in first. The deal also traded up in the after-market. This was a transaction with 'historic' written all over it.

Takeda Pharmaceuticals' $8.5 billion acquisition of Millennium Pharmaceuticals
Acquirer adviser: UBS Investment Bank
Target adviser: Goldman Sachs

See write-up above under Deal of the Year.

Carlyle Group's $560 million acquisition of NH Techno Glass
Acquirer adviser: Merrill Lynch
Target adviser: UBS Investment Bank

The demand for LCD TVs is huge, and this deal represented a bold move by Japan veterans the Carlyle Group to capitalise on the market. The second half of last year was not a great time for private equity, but decent deals could still get done, and this has all the hallmarks of such a deal. NH Techno, a maker of glass substrates for liquid crystal displays, was a 50-50 joint venture between Nippon Sheet Glass and HOYA Corporation. Following the transaction, it will be majority owned by Carlyle with HOYA as a strategic partner with a minority stake. The deal closed in the nick of time, in the summer of last year, just as the financing markets became trickier. The deal features a rare alliance between the sponsor and a strategic investor (HOYA). When exit opportunities begin to improve again, this company should go to the head of the queue.

Sumitomo Mitsui Financial Group's $1.8 billion preferred share issue
Lead managers: Daiwa Securities SMBC, Goldman Sachs, J.P. Morgan, UBS Investment Bank

Another important deal, expertly executed in very tough markets was the Sumitomo Mitsui Financial Group $1.8 billion retail Tier 1 offering, which priced in May last year. The leads managed to generate great momentum, and the deal priced tight to the range, generating a book of almost $5 billion from close to 200 accounts: a tribute to the leads in a market which was showing increasing volatility and where competing supply complicated the deal. The deal ended up going 48% to Asia, 49% to Europe, Middle East and Africa (EMEA) with the balance to other regions. The success of the marketing of the retail tranche was reflected in the fact that 68% of the deal went to retail investors.

Westpac Bank's ¥245 billion multi-tranche offering
Lead managers: Daiwa Securities SMBC, Nikko Citigroup, Nomura 
Lead manager on euro-yen tranche: Nikko Citigroup

This was a great deal which came to the rescue of the Samurai market after a period where it looked as if it might be closed for ever. This was the deal which brought the market 'back from the dead', after shocked Japanese institutional investors witnessed foreign blue chip Samurai issuers suffer grievously in the credit crunch. But the Westpac deal was carefully crafted to overcome investors' fears, with the Australian government attaching a guarantee to the deal. That guarantee was sufficient to convince investors, and the Samurai market has now been reopened, although in a somewhat more demanding form than previously.

Yamada Denki's $1.4 billion convertible bond
Lead manager: Nomura

When deals go wrong in the Japanese markets, they often seem to be convertible bonds. But this deal, one of the largest of the year, was an excellent reflection of Nomura's capabilities in the area. Electronics retailer Yamada Denki's issue was well priced -- at a good premium to reduce dilution -- and generated strong demand. The deal (the proceeds of which were used for a share buyback) was so successful in fact, that many believed it would trigger a spate of copy cat deals. Given the keen pricing, excellent marketing and execution, and the fact that it was shareholder-friendly, it's not hard to see why.

¥72.7 billion Shinsei Bank Headquarters Building securitisation (J-CORE 15)
Lead manager: Deutsche Bank AG Tokyo Branch

This was surely one of the most dramatic, difficult and speedy deals of the year. Shinsei Bank was keen to offload its headquarters to help its earnings figures and Deutsche Bank was chosen for its ability to carry out a fast and effective deal. This was financing at its best: -- the use of a difficult technique in a skilful manner to help a client under some stress. It was a risky deal for Deutsche Bank, too, but they carried it off with real panache.

World Bank's $25 million Certified Emission Reduction-linked CO2L Uridashi Bond
Lead manager: Daiwa Securities SMBC

Aimed at Japanese investors, this bond combined the laudable aim of 'saving the planet' with sophisticated financing techniques. The US dollar-denominated bond offered principal protection with a fixed rate coupon, which was then followed by a coupon linked to the performance of CER (Certified Emission Reduction, a unit representing one tonne of CO2 equivalent) market prices. It is good to see financial techniques combined with climate-saving techniques being made more familiar and transparent to investors, which makes this deal a worthy winner of the most innovative deal category.

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