NEW YORK, NOV. 30 -- PaineWebber Group Inc. today became the latest Wall Street firm to look to the Pacific Rim for a capital boost. The securities firm said it is selling an 18 percent stake to Yasuda Mutual Life Insurance Co. of Japan for $300 million.
The deal will boost PaineWebber's equity capital base 38 percent, to $1.1 billion, and its total capital base to $1.45 billion from $1.15 billion.
PaineWebber becomes the third major U.S. investment firm to take on a Japanese partner. Last year, American Express Co. sold a 13 percent stake in Shearson Lehman Bros Inc. to Nippon Life Insurance Co. and Goldman, Sachs & Co. sold a 12.5 percent stake to Sumitomo Bank.
Bear Stearns Cos. also said in September that it was selling a 20 percent stake to Hong Kong's Jardine Strategic Holdings, a deal that was called off after the stock market collapse Oct. 19.
In making today's announcement, Donald B. Marron, president and chief executive officer of PaineWebber, said the firm began seeking a foreign investor after completing a five-month strategic review in June.
The plan that evolved from that review, Marron said, called for PaineWebber to accelerate its global expansion and focus its energy and capital on four core businesses: asset management, investment banking, trading, and retail and institutional sales.
"This should make PaineWebber more of a global player," said Perrin Long, who follows the securities industry for Lipper Analytical Services Corp. "Hopefully, Yasuda can open up some doors for them in Tokyo.
"While this will provide PaineWebber with more capital, it will not necessarily make them more profitable," he added.
PaineWebber has had limited operations in Tokyo since 1974. The firm currently has about 25 employes in Japan.
In addition to the capital infusion, Marron said, PaineWebber and Yasuda plan to "establish a London-based joint venture company, which will engage in asset management and financial advisory activities." The joint venture will operate independent of PaineWebber's existing London and Tokyo businesses. The firm has been in London, where it employs 230 people, since 1972.
PaineWebber and Yasuda, the fifth-largest Japanese life insurance company and a unit of the Fuyo Group, began talking Aug. 19. The transaction should be completed in a few weeks.
As part of the deal, Yasuda has an option to convert its preferred shares, which represent 18 percent, into a maximum 25 percent of the firm's common shares, according to a formula that has a minimum conversion price of $29 per share.
Long pointed out that Yasuda will be receiving about a 7 percent return on its investment in PaineWebber, which is 50 percent higher than the insurance company could get in its own home market.
Yasuda was founded in 1880. In its latest fiscal year, which ended March 31, the company reported about $42 billion in life insurance sales, $495 life insurance in force and $21 billion in assets.
For the third quarter, PaineWebber, which was the nation's 13th-largest investment firm in total capital as of Jan. 1, reported net income declined some 30 percent, to $14.8 million on revenue of $628.6 million.