Since the establishment of the Equity Finance Group in October 2016, JBIC has been working to strengthen its equity financing operations. One of the growth strategies of the Japanese government aims to benefit from overseas growth markets. To achieve the government's growth strategy, it is becoming increasingly significant to supply funding through strengthening risk-taking capability. In light of this, JBIC has enhanced its capability in the area of equity financing, such as by establishing JBIC IG Partners (JBIC IG) to provide advisory services regarding overseas investment funds. JBIC has also financed overseas M&A transactions by Japanese companies in the form of equity participation.
One of the basic policies in JBIC Third Medium-term Business Plan (FY2018–FY2020) announced in 2018 is to enhance its risk-taking capability by capitalizing on its strength and characteristics as a policy-based financial institution. The Medium-term Business Plan also designates "Growth areas, new fields" and "M&A" as priority areas to focus on. We are required to supply funding to investments in those high priority fields by means of equity financing.
Under the Medium-term Business Plan, we will continue to proactively support Japanese companies in expanding overseas through our equity financing capacity.
Managing Executive Officer
Global Head of Equity Finance Group
Business Environment and Key Challenges
Expansion into Growth Areas, New Fields and Support for Overseas M&A
Amid the progress of innovation, the recent trends of overseas expansion by Japanese companies show a notable move towards utilizing overseas M&A as a way to obtain new technologies and technical know-how from overseas. Japanese industries are going through a major structural shift to the Fourth Industrial Revolution driven by innovation in technology such as IoT and AI. The Japanese government's Future Investment Strategy 2018 (Cabinet decision on June 15, 2018) also states that it is indispensable for Japan's future growth to promote social change through open innovation such as collaboration in the use of technologies, human resources and data across different organizations and sectors.
Looking at global markets, as evidenced by the emergence of IT platformers in the U.S. and China, competition across different industries and that for acquiring the market of new innovative technologies is expected to intensify further. Under such circumstances, it is an immediate need that Japanese industries make strategic efforts towards promoting innovation.
M&A activities by Japanese companies aimed at acquiring overseas markets and meeting their demand become more important because of Japan's structural issues such as a decreasing birthrate and an aging population as well as a shrinking labor force. Amid intense competition for acquiring foreign markets, overseas M&A activity is one of the important means adopted by Japanese companies for accelerating growth. Under such conditions, overseas M&A activities by Japanese companies in 2018 reached a record high of 777 deals*1. It is important to continue to supply funds in response to the needs of Japanese companies for M&A.
In light of these changes in the external environment, JBIC will support Japanese companies in conducting M&A activities in growth areas, new fields, in the form of equity participation as well as fund investment through JBIC IG Partners.
Overview of JBIC IG Partners (JBIC IG)
JBIC IG is an investment advisory firm established in June 2017, by JBIC and Industrial Growth Platform, Inc. (IGPI). JBIC IG applies the respective strengths of JBIC and IGPI as follows: JBIC has knowledge and experience of financing international projects as Japan's policy-based financial institution; IGPI has the knowledge of investment business and broad experience in providing companies with hands-on support for long-term, sustainable growth in corporate and business value. JBIC IG aims to create long-term, sustainable value for Japanese investors and industries through the development of global business opportunities and a disciplined investment approach.
About JBIC IG Partners
JBIC IG Partners is an investment advisory firm established by JBIC and IGPI.
Business Model of JBIC IG
JBIC IG composes overseas funds by partnering with foreign sovereign wealth funds (SWF) and international investors, through investment advisory services to overseas funds. As its first effort, JBIC IG entered into a co-investment framework agreement with the Russian Direct Investment Fund. In January 2019, JBIC IG established a venture capital fund with AS BaltCap, the largest fund manager in the Baltic region. JBIC IG will continue to provide added value to Japanese industry through the creation of new investment funds.
Overview of JBIC IG Partners' Investment Structure
JBIC makes equity investments in overseas companies through investment in funds that JBIC IG Partners launched in collaboration with overseas partners.
Strengthening JBIC's Capability of Equity Financing
Promoting Open Innovation and Acquiring Overseas Technologies by Japanese Companies
To support open innovation of Japanese companies through investment in funds, JBIC made equity investment in JB Nordic Fund I SCSp (JB Nordic), a venture capital fund investing in early stage start-ups in the Nordic and Baltic region.
The Nordic and Baltic region is establishing itself as one of the world's start-up hubs thanks to the existence of numerous unicorn companies (unlisted companies with corporate value of $1 billion or higher) and vibrant entrepreneurial spirit in the region. Under such circumstances, JBIC IG launched JB Nordic in cooperation with AS BaltCap, the largest fund manager in the Baltic region. In addition to JBIC, Omron Corporation, Panasonic Corporation*2 and Honda Motor Co., Ltd. also invest in the Fund. The aim of the Fund is not only to invest in deep-tech companies in the region, but also to create opportunities for those Japanese investors to invest in or form business alliances with local companies in the region.
JBIC and Dentsu Inc. (Dentsu) made a joint investment in DAZN Group Limited (DAZN, former Perform Group Limited), of the U.K. DAZN is a global market leader in the commercialization of sports content across multiple digital and broadcast platforms. With this investment in DAZN, Dentsu plans to strengthen their international advertisement business using digital technology, as well as their sports business.
JBIC supported JX Nippon Mining & Metals Corporation (JXNMM) by financing part of funds required for purchasing all shares in H.C. Starck Tantalum and Niobium GmbH (HCS TaNb), a German company. HCS TaNb is one of the world's leading companies in the development, production and distribution of tantalum and niobium products (high-purity metal powder), a type of rare metal, which are widely used in the Japanese electronics industry. Through the acquisition of HCS TaNb shares, JXNMM seeks to reinforce its business in the area of advanced materials by utilizing HCS TaNb's competitive technological and marketing capabilities.
Support for Securing Important Resources through Equity Investments
In order to support the overseas business expansion by Japanese companies and secure the supply source of mineral resources to Japan, JBIC made equity participation in Vietnam Rare Elements Chemical Joint Stock Company (VREC), a Vietnam-based company invested by Daiichi Kigenso Kagaku Kogyo Co., Ltd. (DKKK).
DKKK holds the world's top-class share in production of zirconium compounds, a main raw material for ceramic products such as automobile emissions purification catalysts. The purpose of the investment in VREC is to provide necessary funds for DKKK to manufacture zirconium oxychloride used as a raw material of zirconium compounds at a plant of VREC and to export this to Japan.
Support for DKKK to secure their procurement route of zirconium oxychloride helps them expand their business in Vietnam as well as secure the stable supply of zirconium, a strategically important mineral resource for Japan.