Japanese Business Blog - Rudlin Consulting

Reflections on the past forty years of Japanese business in the UK – what’s next? – 1

Pernille Rudlin gave a talk in Japanese to the Jiji Top Seminar on November 22nd 2024. She took look at 40 years of Japanese business in the UK, how it has evolved and what the future might hold.

Through the lens of her own career working in and with Japanese companies, she traced the fortunes of the British and Japanese companies who supported the 1985 “Japanese Miracle” conference at Oxford University which she helped with as a student. She covered the impact of the “Big Bang” in 1986, the bursting of the Japanese economic bubble, the Asian financial crisis, the dotcom bubble and crash, the global financial crisis and Brexit. The shifts in balance between manufacturing, services and European coordination were also analysed, with some thoughts on what the new Labour government might mean for Japanese companies in the UK.

This is a summary in English of the talk – each slide will be a separate post.

Slide 1: In researching this topic, I came across the poster you can see here. It’s from the 1906 General Election, and as you can see it was issued by the Conservative Party. The alliance that they refer to was the 1902 Anglo-Japanese alliance. Both countries were worried by the the threat from Russia, and then in 1904-5 Russo-Japanese War, Japan defeated Russia, the first time in modern history that an Eastern nation had defeated a Western one.

The British government praised the Japanese for their victory and the British public were also admiring of Japan’s “pluck” but the alliance was not a vote winner for the Conservatives, who lost badly to the Liberals. The 1906 election also saw the rise of the newly renamed Labour Party, headed by Keir Hardie. Our prime minister, Keir Starmer’s parents named their son after Keir Hardie – evidence that Starmer very much came from a Labour supporting household.

When I first saw this poster, it set me thinking whether we were about to see an Anglo-Japanese Alliance 2.0.

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Marubeni-Itochu Steel adds another British company to its supply network

Marubeni-Itochu Steel has acquired Scotland based plate processor Angus F. Gunn via its UK subsidiary Barclay & Mathieson. This adds to Marubeni-Itochu Steel’s capacity to supply British oil and gas, renewable energy and construction industries.

Marubeni-Itochu Steel accquired Glasgow based Barclay & Mathieson in 2022. It has around 400 employees, whereas Angus F. Gunn has 25 employees. Marubeni-Itochu Steel Europe is based in Germany, with a branch in London, alongside Marubeni-Itochu Tubulars, which employs around 50 people, with operations in Milan and Algiers.

What impact will Tokyo Metro’s stake in the Elizabeth Line operating company have?

Tokyo Metro and Sumitomo Corporation have 17.5% share each of consortium that won the 7 year contract to run the Elizabeth Line, meaning Hong Kong owned incumbent MTR lost. Sumitomo Corporation is looking to develop commercial and retail opportunities around stations – as happens in Japan and is beginning to happen in London Underground stations. Tokyo Metro’s incentive for getting involved is that it did not attract institutional investors when it listed on the Tokyo Stock Exchange last month, because of lack of growth opportunities in Japan, where population is declining.

But what impact will Tokyo Metro have on the actual operations of the Elizabeth Line? I share the Toyo Keizai correspondent’s scepticism as to whether it will “breathe a breath of fresh air into the British railway industry in the form of ‘Japanese railway culture'” There no indication as yet that Tokyo Metro will be starting a subsidiary in the UK, nor that any Tokyo Metro staff will be transferred to London.

Toppan to acquire Swedish Assa Abloy’s Citizen ID business

Toppan will acquire the Citizen ID business of HID Global Corporation, which is in turn owned by Sweden’s Assa Abloy. Although Assa Abloy is Swedish, HID Global is headquartered in the USA, and Toppan say they are acquiring it to expand their global security business in South America, Africa, and other regions. HID Global has operations in Czech Republic, Ireland, France, Poland, Switzerland and the UK – although to what extent these businesses will now be split up is not yet clear.

The acquisition is part of Toppan’s goal to pursue US$326m of overseas acquisitions by the end of fiscal 2025, shifting its business focus from printing to security and packaging. Toppan used its financial subsidiary set up in Singapore last year to secure stable financing for acquisitions and other investments for the acquisition of the CID business.

Nippon Paint acquires US-Swiss specialty chemicals firm AOC for $2.3bn

Nippon Paint is acquiring AOC from private equity firm Lone Star, with the deal expected to finalise in the first half of next year.

AOC is a global manufacturer of coatings, colorants, and composite resins. It was known as AOC Aliansys until 2018 – a combination of US based AOC and Switzerland based Aliansys. Lone Star acquired AOC from CVC Capital Partners in 2021.

Nippon Paint has made other global acquisitions in recent years, including France’s Cromology and the DuluxGroup in Australia. The acquisition of AOC will add operations in Czech Republic, France, Germany, Italy, Switzerland, the Netherlands and the UK to Nippon Paint’s presence in Europe.

Nippon Paint had 33,000 employees in 2023, 89% of whom were based overseas.

Nippon Express acquires German logistics company Simon Hegele

Japanese logistics company Nippon Express has acquired German logistics company Simon Hegele Group. Simon Hegele Group has almost 2,800 employees in around 50 locations, mostly in Germany but also including the UK and Turkey. Simon Hegele is to continue with its current structure and management.

This adds to the acquisitions that Nippon Express made in 2023 of Austrian company Cargo-Partner and Switzerland based Tramo Group and the 3,500 employees of Nippon Express owned companies in Europe, Middle East and Africa.

Japan’s Wacoal acquires UK’s Bravissimo

Japanese women’s underwear maker Wacoal Holdings will acquire UK headquartered Bravissimo Group for £45.7 ($61.3 million). Bravissimo is a retailer specialising in larger sizes, with both stores and an e-commerce side. It is mainly focused on the UK market, employing 458 people.

Wacoal acquired British lingerie manufacturer Eveden in 2012 which manufactures brands such as Fantasie and Freya, employing around 350 people in the UK and another 75 or so in France. It also has operations in New York, Australia and the Netherlands.

UK second largest recipient of Japanese overseas M&A deals – but far behind USA

We were surprised to see that the UK was second only to the USA as the location for Japanese overseas M&A deals in 2023, according to Recof, as the number and scale of deals we were aware of in the UK seemed to have died down considerably over the past 10 years. Then we looked more closely and realised that of the 660 overseas acquisitions Recof has recorded, 220 were in the USA, and only a fifth of that (44) in the UK. The third and fourth ranked countries were Singapore and India – so it was not a case that acquisitions were shifting to continental Europe either.

We have been aware of 16 acquisitions in the UK in 2023, mostly by the larger Japanese companies – logistics and food related acquisitions have been a particular focus. So it seems likely the other acquisitions were made by smaller Japanese companies. One such did cross our radar recently – Japanese entertainment company GENDA acquired Lemonade by Lemonica – another Japanese company, thereby acquiring Lemonade Lemonica UK. Lemonade Lemonica was, as you might imagine from the name, a drinks company. The UK operation was started in 2021 under the name Pino Pino Zaurus and has only 1 employee. GENDA have now established GENDA Europe, in the UK, to support the growth of Lemonade Lemonica, and because “the UK is one of the best places for Japanese companies to build their management base in terms of business environment and systems.” GENDA has been rolling up many Japanese entertainment related companies, so perhaps further acquisitions are to come, impacting Europe.

Japanese automotive supplier Denso acquires manufacturing license from British green hydrogen technology company Ceres

DENSO Corporation has signed a manufacturing license agreement with Ceres Power Holdings, a UK based developer of solid oxide cell stack technology. DENSO aims to advance the early practical application of Solid Oxide Electrolysis Cells that produce hydrogen through water electrolysis.

Denso has traditionally been a supplier to Toyota, a strong advocate of hydrogen fuel.