Japan robot stock advisor Wealthnavi to be acquired by MUFG

Exit for promosing growth company at a steep discount from all time high

Japan’s Mitsubishi UFJ Financial Group (MUFG) (8306 JP) announced on November 29, 2024 that it would spend approximately 99.7 billion yen ($664 million) to acquire WealthNavi Inc. (7342 JP), a provider of automated asset management, and make it a wholly owned subsidiary. MUFG is one of the biggest stocks in Japan based on market cap with a $142 billion valuation. The financial services company trades near its record high on the stock market and is known for its progessive dividend policy.

The acquisition highlights MUFG’s growing strategy of expanding through takeovers to enhance its service offerings. MUFG will launch a tender offer on Monday at 1,950 yen per share, representing an 84% premium over WealthNavi's closing price on Thursday. Following the announcement, WealthNavi’s stock surged by 28% on Friday, hitting the daily limit of 1,358 yen, after the Nikkei business daily reported the deal ahead of the official statement. Wealthnavi does not pay a dividend and the stock has been struggeling throughout 2024 with a 30% loss YTD even after the MUFG bid from last Friday.

WealthNavi, in which MUFG already holds a stake of 15.3%, managed over 1 trillion yen in assets as of January, making it the largest robo-adviser in Japan. With this MUFG is the second largest shareholder in Wealthnavi after CEO and founder Kazuhisa Shibayama with 17.5% of Wealthnavi shares. Wealthnavi has reported double digit revenue growth in the last couple of years and is expected to grow its sales by more than 30% in both 2024 and 2025. Because of the small profit Wealthnavi makes the valuation looks steep with an estimated p/e of 197 for FY 2024.

While many Japanese traditionally save their assets, the government has been encouraging citizens to invest in financial markets by expanding tax-free investment programs, such as NISA, partly to reduce reliance on the public pension system.

MUFG initially acquired a partial stake in WealthNavi in February, reflecting a broader trend of financial firms partnering with fintech companies to expand digital services. This acquisition is a further step in MUFG’s strategy of leveraging takeovers to strengthen its digital and automated wealth management capabilities. With the bid for Wealthnavi MUFG is benefiting of the depressed share price of Wealthnavi; back in 2021 the stock traded above 4,500 yen shortly after the company did its IPO in December 2020.

Several other high growth companies from Japan have been involved in M&A activity recently, including online marketing research specialist Macromill Inc (3978 JP). Macromill stock is up 53% YTD after a 1,150 yen per share bid by a company related to private equity company CVC. The difference with Wealthnavi is that Macromill actually pays a dividend with excellent dividend growth stats in the last couple of years. Macromill also has a low valuation with a p/e of just 15 for 2024 and a high dividend yield of 3.1% at a stock price of 1,204 yen. Shareholders seem to expect a higher bid with the stock trading above the bid by CVC.

Disclaimer: The information provided here is for informational purposes only and should not be considered financial advice. Investors should conduct their own research or consult with a financial advisor before making any investment decisions.