Japanese takeovers invigorate trade ties

Takeda CEO Yasuchika Hasegawa. The company has offered to pay $13.6 billion for Swiss drug maker Nycomed Reuters

The announcement that two Japanese corporate giants are intent on taking over Swiss firms comes against the prevailing flow of trade between the two countries.

Japan’s largest drugmaker, Takeda, plans to buy Swiss-based pharmaceutical firm Nycomed for $13.6 billion (SFr12 billion), while Toshiba said it had agreed a $2.3 billion (SFr2.03 billion) deal to buy meter manufacturer Landis+Gyr.

If the takeovers of both privately-owned companies gain regulatory approval, they would significantly boost the presence of Japanese companies in Switzerland.

Nycomed traces its roots to Norway and was part of a merger with a British company before moving its headquarters to Zurich in 2007. Around 200 of its 12,500 employees are based in Switzerland.

The company achieved sales of €3.2 billion (SFr4 billion) last year with drugs that treat gastric and respiratory disorders and osteoporosis. Takeda said it was particularly attracted by Nycomed’s presence in Brazil, Russia and China.

Founded in 1896, Zug-based Landis+Gyr has carved out a strong niche making meters for smart electronic grids – an area that Toshiba wants to expand into.

New markets

Both deals have caused some surprise considering the paucity of  significant Japanese investments in Switzerland in the past and the poor state of Japan’s economy following the March earthquake and tsunami.

The planned takeovers show that Japanese corporates have stepped up efforts to expand abroad, according to Wolfgang Schanzenbach, regional director for Asia/Pacific at foreign trade promotional agency Osec.

“The Nycomed deal is the logical consequence of market pressures in Japan forcing Japanese companies to seek footholds in other parts of the world,” he told swissinfo.ch.

“These firms are feeling the pressure of declining demand in their domestic market and are branching out ever more into other parts of Asia, the US and Europe.”

Rebalance trade

Switzerland is keen to attract as many Japanese companies as possible. Former Swiss Economics Minister Doris Leuthard said she wanted a more “balanced investment situation” between the two countries after the signing of a free trade agreement (FTA) in 2009.

Around 100 Japanese companies have set up activities in Switzerland – including Japan Tobacco, Nissan and Sunstar – but they have not done so in significant numbers.

Swiss direct foreign investments in Japan totaled SFr2 billion in 2009, compared to a paltry SFr69 million coming the other way. Swiss investments had created 65,000 jobs in Japan by 2009 compared to 4,000 positions being created by Japanese firms in Switzerland.

Schanzenbach said it was too early to detect if the free trade agreement had significantly boosted Swiss-Japanese trade, but pointed out that there are plenty of synergies between many businesses in both countries.

The areas that presented the best opportunities for future mergers or enhanced trade are in the pharmaceuticals, biotechnology, life sciences and information technology sectors.

“Japanese companies appear to be quite busy with aggressive expansion plans right now,” he said.

Recovery process

Michiaki Watanabe, head of the Swiss branch of the Japan External Trade Organisation (Jetro), believes the FTA has helped boost the interest of Japanese firms in Switzerland.

“With  the signing of the taxation convention [avoiding double taxation] and the free trade agreement, the  business environment between the  two countries is now well set, especially concerning the migration of workers and taxation,” he told swissinfo.ch.

“I know of several small Japanese companies that will try this year to come to Switzerland or to buy Swiss firms.”

The news of Takeda and Toshiba’s intention to make significant acquisitions in Switzerland comes on the same day that Japan admitted that its economy had sunk into recession.

Figures from Japan show the country’s economy had shrunk 0.9 per cent in the first three months of the year. Economists expect the world’s third largest economy to slide by up to 3.7 per cent this year.

But Schanzenbach believes Japanese companies will bounce back from the natural disaster and the related crisis at the Fukushima nuclear power plant.

“There is a mistaken belief that, following the earthquake, corporate Japan would grind to a halt,” Schanzenbach said. “However, we are quite bullish that after a few quarters of decline, business will start to return to normal in Japan.”

Switzerland – Japan trade

There are around 140 Swiss firms directly operating in Japan and some 100 Japanese firms on Swiss soil.

Among the biggest Japanese firms in Switzerland are Japan Tobacco International in Geneva and car manufacturer Nissan, that moved its European HQ from France to canton Vaud in 2006.

Hitachi Medical Corporation established its European base in canton Zug 12 years ago, Silicon chip manufacturer Elpida Memory is present in canton Geneva and Sekisui Chemical can be found in canton Lucerne.

Refrigeration specialist Mycom Intertec (part of Mayekawa Manufacturing) has been in canton Zug since 2004, outdoor clothing company Mont Bell opened its first European store at the foot of the Eiger mountain four years ago.

Sunstar, that produces a range of products from dental care to motorcycle parts, opened its global headquarters in canton Vaud in 2009.

Swiss exports to Japan totaled SFr7.15 billion ($8.1 billion) in 2009 – an increase of 1.3 per cent.

Japanese exports to Switzerland fell 13.7 per cent in the same year – to SFr3.6 billion.

Swiss investments in Japan totaled SFr2 billion in 2009 compared to SFr69 million of Japanese investment into Switzerland.

Swiss companies employ some 65,000 people in Japan with only 4,000 employed by the activities of Japanese firms in Switzerland.

(with input from Kuniko Satonobu)