In one of the biggest foreign takeovers of a Japanese company, General Electric Co, the $100bn American electronics and financing company has paid between $6bn and $7bn to acquire a substantial portion of the assets held by Japan Leasing Corp, an affiliate of the defunct Long Term Credit Bank of Japan. GE’s Capital Services division, the financial services arm of the company that is based in Stamford, Connecticut and which accounts for about 40% of GE’s profits and revenues, made the deal to acquire a slice of Japan Leasing’s portfolio last Saturday, a deal that has been in the works since LTCB and, by extension, Japan Leasing, went bankrupt and were nationalized by the Japanese government last summer. At the time, Japan Leasing had liabilities in excess of $27bn. Exactly what is in the portfolio that GE Capital has bought is not certain, but GE says that it has steered clear of all the speculative real estate investments that Japan Leasing made in the late 1980s and early 1990s and which subsequently caused its demise. In addition to real estate investments, Japan Leasing was involved in computer, aircraft and other capital equipment leasing. The exact nature of Japan Leasing’s portfolio and the pieces GE Capital acquired remain unknown. Similarly, not even GE Capital has a good handle on how much of the portfolio among its 28 separate divisions is invested in information technology. But odds are that computers and other IT equipment make up a substantial portion of the financial services revenue at both Japan Leasing and GE Capital, which means that GE Capital will be that much more of a player in IT leasing. One thing GE Capital did not get its hands on as part of the takeover was a 19.5% stake in privately held El Camino Resources, a $700m computer leasing and reselling organization based in Woodland Hills, California. According to David Harmon, CEO of El Camino, Japan Leasing and one of its affiliate companies bought a 25% stake in El Camino back in May 1990. El Camino, which was about a third its current size then and growing fast, needed a partner to give it an entry into the Japanese capital equipment markets as well as the cash to back its growth. At that time, Japan Leasing was willing to hand over the money for another reason it desperately needed a partner with expertise in writing operating leases, which are common in the United States but rare in Japan. Japanese firms generally only write full pay-out leases. In the early 1990s, Japanese companies were investing heavily in the US, which was in the midst of a recession, and Japan Leasing needed to be able to finance the equipment that Japanese manufacturers in California and other parts of the country were buying to build their wares in the States. At the time of Japan Leasing’s initial investment, El Camino said that the money would help it triple its $100m annual lease volume. It certainly did that. But for the past three or four years, says Harmon, Japan Leasing has only helped it bring in between $4m and $5m in new business. Harmon says that the collapse of Japan Leasing has had no effect on day- to-day operations at his company. Harmon says that GE Capital won’t get that stake – he doesn’t say whether or not they tried to get it – and adds that he and his partners, David Wolff and Mel Kleinman, are looking for ways to try to buy back their stock from Japan Leasing. But that’s an expensive proposition, especially for an El Camino that has ditched its wholesale computer reselling business and is trying to reposition itself as a computer retailer and a services provider. Still, the El Camino stock held by Japan Leasing is marketable (El Camino has refusal rights on any sale), and that means sooner or later Japan Leasing is going to try to find another buyer. á
