TDK buys Germany’s Epcos for $1.9bn

TDK joined an upswing in foreign acquisitions by Japanese companies on Thursday as it announced plans to buy Epcos of Germany for €1.2bn ($1.9bn).

The Japanese components maker said it was preparing a friendly offer of €17.85 a share, 29 per cent above Epcos’s closing price on Wednesday. The deal would be the largest takeover of a German company by a Japanese acquirer.

Even as the credit crisis has squeezed many US and European groups out of the acquisitions market, Japanese companies are exploiting low debt levels and comparatively easy access to funding to expand abroad.

The value of foreign acquisitions by Japanese groups this year has climbed to $34.9bn, according to Dealogic, 50 per cent higher than the total for 2007.

Last week Tokio Marine said it would buy Philadelphia Consolidated, a midsize US non-life insurer, for $4.7bn. Takeda Parmaceutical has said it will pay $8.8bn to take over Millennium, a US biotechnology company, while Daiichi Sankyo offered $4.6bn for Ranbaxy Laboratories, India’s biggest generic drugs maker.

TDK is one of the world’s biggest suppliers of high-tech parts for electronic devices – from the magnetic recording heads used in hard disk drives to tiny ceramic capacitors found in mobile phones and flat-screen televisions.

The company has made a number of smaller acquisitions since early last year in an effort to expand its product range and increase its manufacturing scale. At the same time it has sold its only widely known consumer business – its line of recordable CDs, DVDs and tapes – to Imation of the US in order to focus on materials and components.

Katsuyuki Nakai, analyst at Standard & Poor’s, said the Epcos purchase would “supplement TDK’s product portfolio and geographical diversification” and “enhance its business franchise over the next five to 10 years”.

Epcos, maker of electronic components for companies such as Nokia, listed on the Frankfurt stock exchange in 1999, having been formed 10 years previously as a components joint venture by Siemens of Germany and Matsushita of Japan.

Epcos on Thursday said third-quarter profit rose 8 per cent thanks to a sales boost outside its home market. Earnings before interest and taxes in the three months to June increased to €28m from €26m a year before. Sales rose 1 per cent to €367m.

Nomura and Rothschild advised TDK on the deal. UBS advised Epcos.