Asia's Buffett 'Gets' Tech as He Transforms Softbank

 | May 11, 2017 | 10:00 AM EDT
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Masayoshi Son is arguably the most-important and revolutionary investor in Asia right now. He is moving Softbank, the company that he founded in 1981, from its roots in telecommunications and transforming it into an investment fund of funds that spots technology trends early -- and takes them into the portfolio. 

People increasingly call the technological innovation we are witnessing the Fourth Industrial Revolution. It's very clear in the structure of the markets, with technology companies replacing oil firms and industrial companies as the largest by market capitalization in the U.S. Softbank's place demonstrates the way Asia will change.

Asia has had less of a tech explosion so far compared with the West, at least at the top of its markets. But it has already veered well away from manufacturing -- a seismic shock in a region typically seen as the "world's factory."

The world's ATM is more like it. The largest companies in the region are mostly financials, looking at the Vanguard FTSE Pacific ETF (VPL) , one of the few major products that includes Japanese companies alongside those from the rest of Asia.

The largest Asian companies are, as of the end of the first quarter: Samsung Electronics (SSNLF) , Toyota Motor (TM) , Commonwealth Bank of Australia (CMWAY) , Westpac Banking (WBK) , Mitsubishi UFJ Financial Group (MTU) , AIA Group (AAGIY) , the Australia and New Zealand Banking Group (ANZBY) , National Australia Bank (NABZY) , Softbank (SFTBY) and BHP Billiton (BHP)

Only Softbank is an outright tech company, and it's increasingly active as a private-equity investor, much like Berkshire Hathaway. It is very close to announcing as much as $95 billion in backing for its Vision Fund to pump money into other technology companies, according to Bloomberg, which says the funding close will happen as soon as next week.

The sovereign wealth fund of Saudi Arabia may invest as much as $45 billion, with Mubadala Development from Abu Dhabi chipping in another $15 billion. Apple and Qualcomm (QCOM) have also said they will participate. Softbank expects to contribute at least $25 billion in capital into what would become one of the world's biggest tech funds over the next decade.

The fund will likely accelerate Softbank's push into India, where it is resuming investment activity after a lull, according to the Nikkei Asian Review. "Masa," as Son is widely known, has pledged to invest $10 billion in India over the next 10 years.

The Japanese company has inked an agreement to invest $1.5 billion in One97 Communications, which runs the mobile-payment platform Paytm. That would give it 20% of the shares in the unlisted Indian company, which got a boost from India's recent decision to eliminate 86% of the cash notes in circulation.

Softbank is also engineering a merger of two of India's largest e-commerce operators. It already owns the largest holding in Jasper Infotech, parent of Snapdeal, which it wants to combine with Flipkart. That would combine their troops in the battle with Amazon for Indian online sales.

Softbank has already agreed, over the last year, that it will spend more than $30 billion of its own money on technology companies. Its biggest deal so far is the $32 billion acquisition of British chip designer ARM Holdings last year. That's a play on the "Internet of Things," final destination for the bulk of those chips.

The company's investment arm Softbank Group Capital accounted for $2 billion of the $5.5 billion in new funding for Didi Chuxing, China's equivalent of Uber. That is now the second-largest private company in the world, behind, well, Uber.

After fierce competition within China, Didi acquired Uber in China. Didi for the first time just introduced an English-language app and started accepting international credit cards. This was something Uber had offered in China but which had temporarily disappeared with that deal. It's a likely first step on Didi's attempt to conquer the non-Chinese-speaking world.

Softbank Group Capital has also invested $300 million in WeWork, $75 million in the California biotech company Zymergen and $63.5 million in SB Energy Holdings.

Softbank's Son has also forged a partnership with Jeff Sine, who contributed the "ine" to the boutique investment bank Raine Group, alongside co-founder Joe Ravitch. Both are media and technology bankers. Softbank has invested in many of the deals that Raine arranges.

Softbank already owns some 70% of the phone company Sprint (S) , an acquisition where Raine Group was a surprise advisor alongside Japanese giant the Mizuho Financial Group (MFG) . Both Raine and Mizuho then also worked on the ARM Holdings deal.

Softbank also holds stakes in Alibaba (BABA) , despite recently selling some of that stock, and YahooJapan (YAHOY) . In March 2016, it invested $250 million in WME-IMG, the sports, media and fashion agency, which represents many of the world's top athletes.

Now, Softbank is coming to the United States. In February, it agreed to pay $3.3 billion for the New York-based asset manager Fortress Investment Group (FIG) . That expands its investment expertise as it launches the Vision Fund.

Son was pretty much the first executive to meet Donald Trump after his election. The president-elect was, surprise, surprise, quick to tweet on Dec. 6 that his new pal had promised to invest $50 billion in U.S. startups and create 50,000 jobs.

That's a dubious claim, as the Washington Post explores in a very interesting article. For starters, that money is coming from the Venture Fund itself, meaning it's much more Middle Eastern money than Eastern. And Son already had plenty of plans for U.S. expansion.

But Son also sniffed an opportunity. Why not repeat his investments and give Trump the credit, since Softbank requires regulatory approval for many of its deals?

Smart business indeed. And coming to a part of your world, soon.

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