Initiatives in the Asian Region
The Asian region has drawn attention as a driver of growth for the world economy. Factors accounting for this have been entry of companies from overseas into the Asian markets, private capital investment by local companies, high levels of infrastructure investment, and expansion in consumer spending along with economic development.
Mizuho has established a vision in its Medium–Term Management Plan. Its vision is to be "The most trusted financial services group with a global presence and a broad customer base, contributing to the prosperity of the world, Asia, and Japan." Mizuho has positioned Asia as its priority strategic region. Drawing on its knowledge and know–how as a comprehensive financial group, Mizuho is working to contribute to the further development of the economy and societies of Asia by supporting the development of financial and capital markets, the entry of both Japanese and foreign companies into Asia, and the growth of companies based in the region.
Supporting the Entry of Japanese Companies into the ASEAN Markets through Fund Investments
Giving Impetus to the Entry of Japanese Companies into the ASEAN Region through Financial and Management Support Services
The Association of Southeast Asian Nations (ASEAN), which has 10 member states, has shown rapid economic growth over the past 10 years. The demand for funding to support the growth of locally based companies and alliances with companies that have know–how is very strong. ASEAN is also a region where Japanese companies have a strong desire to enter. Among small and medium–sized enterprises (SMEs), there are instances whereby entry is not possible because the burden of looking for local partners, making investments, and then operating local enterprises is too great.
To provide support for the entry of Japanese companies, including SMEs, into these markets amid this operating environment, MHBK has established the Mizuho ASEAN PE Fund (hereinafter, the fund), a private equity fund that supports locally based companies in the ASEAN region (including joint venture companies with Japanese enterprises) in March 2013. The fund is scheduled to have a maximum size of USD 200 million, with a maximum of USD 125 million provided by MHBK. In addition, the Japan Bank for International Cooperation has committed its maximum amount of USD 25 million to the fund, and The Dai–ichi Life Insurance Company, Limited has decided to commit USD 30 million to the fund.
The investments in locally based companies in the region will create an environment whereby Japanese companies can invest and conclude alliances locally, and the fund aims to promote the structuring of alliances among Japanese–affiliated companies and locally based companies. For example, by making investments in local companies jointly with Japanese companies, this fund can lower initial investment costs for Japanese companies and help to alleviate the burden of the investment process beginning with the conduct of due diligence, and provide support for local companies as a joint investment partner. In addition, the fund can make prior investments in local companies that can receive investments from Japanese companies, thus making it easier for Japanese companies to become familiar with conditions in companies they are considering as alliance partners.
Usually, private equity funds seek to make majority investments (51% or higher ownership) to obtain management control, or buyout investments, and then appoint new management and conduct necessary restructuring. However, this fund mainly takes minority positions in investee companies, and then provides new growth capital investments to enable the investee business to grow and increase its corporate value.
- Schematic Representation of the Fund
Considering Many Potential Investments Drawing on the Skills of Experienced Fund Managers
This fund is managed by Mizuho Asia Partners Pte. Ltd. (hereinafter, MAP) which is a wholly owned subsidiary of MHBK (Singapore). In making its investments, MAP draws on the skills of highly experienced fund managers in Indonesia, Malaysia, Singapore, and other ASEAN member countries. These MAP fund managers draw on their experience and network to identify the needs of potential investee companies in detail. As a result, about one year after the fund began its operations, 200 potential investments were identified. After the screening process, MAP consummated three investments—in the restaurant chain, fitness club, and other industries. In addition, there are more than 90 cases whereby the potential investee company under consideration wants to be introduced to a potential Japanese partner, and MAP will match these companies with companies in Japan.
Within MHBK, through the Asia Department of the Industry Research Division, which is located in Singapore, MAP received support carefully tailored to its needs. In addition, within Japan, MAP partners with the Strategic Project Department of the Industry Research Division, industry specific teams, the corporate customer planning divisions, and branches/offices engaged in marketing to identify Japanese companies that are planning to enter ASEAN markets. Customers with these plans are introduced to ASEAN–based companies, and MHBK offers support for concluding business alliances, setting up joint ventures, and concluding M&A deals.
The fund has invested in a restaurant chain in Indonesia, and, by drawing on the know–how of Japanese–affiliated companies, supported business expansion through the development of a new brand.
Asia Culinary Inc Pte. Ltd. (hereinafter, the company) is a Chinese restaurant chain that operates "The Duck King" and 20 premium dining establishments located in the principal cities of Indonesia, targeting middle– to upper–income customers. To accelerate the development of the company's restaurant chain in the suburbs, it is planning to develop a chain with a new brand featuring a revised price structure. Specifically, the company is considering the addition of Japanese restaurants to its strategic business portfolio because Japanese food is becoming increasingly popular in Indonesia. In view of these plans for expansion and the company's consideration of external funding, a number of funds have submitted investment proposals. MAP proposed changing the existing composition of shareholders and introducing growth capital to create a better environment for alliances with Japanese companies. The company decided the MAP proposal met its needs, and the fund invested USD 16.7 million in the company.
In January 2014, the company announced a tie–up with Ten Corporation, a member of Japan's Royal restaurant group, which specializes in serving tendon and tempura dishes in its Tenya restaurant chain in Japan. Going forward, the company plans to create a franchise chain using the Tenya brand in Indonesia, drawing on Ten Corporation's know–how. This arrangement provided the opportunity for Ten Corporation to enter the Indonesian market for the first time.
MHBK and MAP will continue to respond to the needs of both locally based and Japanese companies, and using the resources of the fund, support the entry of Japanese companies into the ASEAN region and provide active support for the growth of ASEAN–based companies that want to strengthen ties with Japanese companies.
Voices of Employees
This fund aims to invest in companies based in the ASEAN region and is consulting with companies in a wide range of industries drawing on the fund's local network.
In this, the first investment made by the fund, MAP acted as intermediary between the Indonesian company and the Japanese enterprise, held specific discussions regarding collaboration, participated in negotiations, and offered support to make the alliance a reality.
Going forward, by holding more in–depth talks with ASEAN–based companies, we want to respond to the needs of these local companies. Also, by making use of the functions of the fund, working together with various divisions in the Group, we want to build a track record for as many investments as possible where we act as a bridge between local companies and Japanese companies that want to enter the ASEAN markets.
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