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Ripplewood Buys Japan Telcom for $2.2B

Posted on: Thursday, 21 August 2003, 06:00 CDT

TOKYO (AP) - The U.S. investment company Ripplewood Holdings LLC will acquire a subsidiary of Japan's third-largest telecommunications company for about 260 billion yen ($2.20 billion) in a leveraged buyout, the companies said Thursday.

New York-based Ripplewood will purchase the fixed-line business of Japan Telecom Holdings Co., which is controlled by Britain's Vodafone Group PLC.

Ripplewood, which made headlines three years ago when it became the first foreign investor to buy a Japanese bank, arranged debt financing from 11 banks including Citibank and J.P. Morgan.

The high-profile deal could stimulate the small but growing market in Japan for mergers and acquisitions, long discouraged by this country's conservative corporate culture.

Ripplewood reportedly wants to use Japan Telecom's fixed-line business as a platform to develop high-speed broadband Internet services. Newbury-based Vodafone, which owns 66 percent of Japan Telecom Holdings, wants to concentrate on Japan's lucrative mobile phone market.

Under the terms of the agreement, Japan Telecom Holdings will receive 261.3 billion yen ($2.21 billion), of which 32.5 billion ($275.4 million) will be in redeemable preferred equities and the rest in cash.

Japan Telecom posted a profit of 79.5 billion yen ($673.6 million) for the fiscal year ended March 31, reversing a loss of 66 billion yen.

Its fixed-line business has struggled to compete with NTT Corp., a former government monopoly, and KDDI Corp., the first company to jump into Japan's long-distance market after deregulation.

But Japan Telecom's mobile phone unit, J-Phone, is growing fast thanks in part to a popular service that allows users to e-mail photos with handsets embedded with tiny cameras.

Operating revenue climbed 8 percent to 1.46 trillion yen ($12.3 billion) last year.

Analysts say Vodafone needs capital to invest in new technology and expand its mobile business in Japan, where a unit of NTT, NTT DoCoMo, controls 60 percent of the market.

Ripplewood has bought up a string of struggling Japanese companies over the last few years as turnaround projects. It led an international consortium that bought the failed Long-Term Credit Bank of Japan - now known as Shinsei Bank - in June 2000. Other acquisitions include a resort operator in southwestern Japan, a record company and an auto parts maker.

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