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Thursday, 27 July, 2000, 15:15 GMT 16:15 UK
Japanese bank buys up UK plc

Guy Hands set up Nomura's Principal Finance Group
News that the Nomura International consortium is to take over the running of the Millennium Dome at the end of the year surprised few people.

It is the latest in a string of UK businesses to fall into the hands of the Japanese bank.

Its proposal for the Dome is to build an entertainment mecca, including a "Yellow Submarine World", based on the Beatles' 1960s hit album.

The business model of the 75-year-old Japanese bank is simple, according to its deal maker Guy Hands: Nomura buys businesses other people think are going out of fashion, boosts their profits, and often sells them on at a profit later on.

In the process it was once the UK's largest pub owner, with 7,000 pubs in its pocket.

It bought and sold the William Hill betting chain for a 125m profit, owned a third of all UK passenger trains and managed 2,000 shops that belonged to Thorn, the rental shop company.

Sleight of hand

Hyder is Nomura's next target
In 1994, Guy Hands, a former Goldman Sachs investment banker, set up Nomura's Principal Finance Group.

Nomura had money to spend, but faced poor returns in its native Japan and Mr Hands had plenty of ideas as to what they could spend this money on.

"America is about spotting businesses that are on the way up. I try and spot those other people think are on the way down, but aren't," he has said in a previous interview.

The classic example of this is the William Hill betting group, which, despite the popular wisdom that bookmaking was in decline, Nomura PFG bought and sold on for a 125m profit.

"We seek out large businesses others do not find attractive," he explains.

"They normally appear to lack growth potential even though their cash flow is stable. They are neglected and undervalued by the market. We like sectors that are in a state of flux and have some unpredictability, perhaps as a result of privatisation or market consolidation," he added.

Securitisation in numbers

One of Hands' tricks is to finance the purchase of businesses by borrowing money against their income.

If Nomura PFG buys a company with a steady income - for example, the regular rental payments customers pay to Thorn - it uses this stream of income to borrow money cheaply.

This basically means that, for example, Thorn's television revenues could be used to pay the interest payments on a bond.

The success has prompted other City banks to take the same path.

Speculation is that Mr Hands makes between 5% and 10% from each deal, making him one of the City's best paid dealmakers.

One indicator of its success is the fact that late last year Nomura Securities launched a similar outfit in the US, called the Principal Capital Group.

Both groups should create welcome profits for their Japanese parent.

In its home country, Nomura has five million retail customers.

It opened its doors for business on Christmas Day, 1925, in Osaka, Japan and is now one of the world's top ten securities firms.

The company's emblem is an "Ivied Mountain", one it says symbolises the many mountains it has climbed and will climb.

It employs 12,900 staff and is active in 26 countries.

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See also:

22 Oct 98 | The Company File
Nomura to cut 2,000 jobs but London spared
22 Feb 99 | The Company File
Bets off for William Hill float
28 Jun 98 | Business
Nomura splits pub chain
18 Aug 98 | The Company File
Thistle shares slide
01 Jul 98 | The Company File
Japanese raid High Street
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