Canon Chief Ready to Snap Up Deal
With $3 billion to spend, Fujio Mitarai has his eye on growth sector
“We’re looking for a company with technology that we don’t have and that complements our technological capabilities,” Fujio Mitarai said in an interview Monday.
“The field of chemistry related to human life and medical care looks like a promising industry…we can still make an acquisition as big as our purchase of Axis AB,” he added.
Mr. Mitarai was referring to his company’s takeover of Swedish surveillance camera leader Axis for about $2.8 billion, in a move that was emblematic of how Japan Inc. has been aggressively scooping up companies overseas over the past year.
According to data provider Dealogic, the value of acquisitions abroad by Japanese companies so far this year has come to a record $41.1 billion, led by several multibillion dollars deals such as Japan Post Holdings’ $5 billion purchase of Australian logistics company Toll Holdings and Hitachi’s $2.1 billion deal for Italy’s Finmeccanica. In the same period in 2014, just $19.2 billion in deals were announced.
In Canon’s case, it still has about $4.2 billion to spend even after buying Axis. Mr. Mitarai said he’s seeking opportunities both at home and abroad.
Given the slower pace of expansion in the company’s mainstay camera business, he said that about four years ago he started studying growth sectors that could bolster Canon’s profits and complement its technological strengths. He came up with two keywords to drive the search: “safety” and “human lives.”
“With these two growing areas on top of our matured (camera) business, we can continue to grow as a whole,” said Mr. Mitarai, the former head of Japan’s most powerful business lobby.
The 79-year old Canon chief said that he is now satisfied with ”safety” after the Axis AB purchase and that it is now time to pursue the second objective. One possible area, he said are medical products that require frequent replacement such as X-ray contrast agents, reagents and examination packages for genetic testing.
Mr. Mitarai said, however, he isn't interested in pharmaceutical-related plays. He also didn’t sound particularly enthusiastic about buying a medical equipment maker, given that the field is already dominated by major companies. Canon only has a limited involvement in the medical equipment sector in areas such as ophthalmic equipment and digital radiography systems.
He said he believes mergers and acquisitions—rather than building new businesses on their own—are the key to success in fierce global competition.
“You have to buy time through M&As,” he said. “We are now in an era where we have to speed up bringing businesses to the next level by throwing money and new technology into existing companies.”
Regarding the company’s camera business, Mr. Mitarai said he isn't all that pessimistic even though demand for stand-alone digital cameras has been hit hard by the improved quality of smartphone cameras.
Calling the recent downtrend “a burst of a bubble” after people switched from analog to digital cameras, he expects the digital camera market to bottom out either this year or next year.
Mr. Mitarai said business-to-business demand for single-lens reflex cameras will expand globally, while demand for compact digital cameras is expected to pick up in tandem with growth in developing countries.
He projects the company’s camera business will grow in a range of 2% to 5% down the road. For the year ended in December, its sales of compact digital cameras and interchangeable-lens digital cameras fell 32% and 17%.