Mitsubishi UFJ NICOS begins tender offer for Zenhoren

Mitsubishi UFJ NICOS, a wholly-owned subsidiary of Mitsubishi UFJ Financial Group, has resolved to acquire the shares of Zenhoren through a tender offer under the Financial Instruments and Exchange Act, and to enter into a capital and business alliance agreement with Zenhoren and MUFG.

Zenhoren was established in November 2001 for the purpose of operating a rent liability guarantee business. Since then, Zenhoren has developed services to bolster its credit, such as the introduction of an approximate estimate payment method, and through activities that meet the various needs of customers, Zenhoren has expanded its rent liability guarantee business. Zenhoren listed its shares on the Standard Market of the TSE in October 2023 and is committed to operating its rent liability guarantee business, primarily for rental housing, in ways that align with its corporate philosophy of “Quality for the Future: To New Value and a New Tomorrow.”

The rent liability guarantee business refers to services that guarantee payment of rent, etc. to a landlord. Specifically, if a tenant fails to pay rent, etc., Zenhoren will pay an amount equivalent to such rent, etc. to the landlord on behalf of the tenant and later collect from the tenant such rent that it paid on the tenant’s behalf. In the past, a parent, child or other members of the tenant’s family typically served as the tenant’s joint and several guarantors required when signing a lease agreement for rental housing. However, as family relationships have weakened and tenants have aged in recent years, and with the new requirement under the April 2020 amendment to the Civil Code setting a maximum amount in a contract for revolving guarantee by an individual, it has become increasingly difficult to secure joint and several guarantors.

It is to address this social issue that Zenhoren operates the business of providing the Rent Liability Guarantee Services. Zenhoren believes that upon receiving entrustment from a tenant, it serves as the tenant’s joint and several guarantors for rent payments and supplements the tenant’s creditworthiness, making the rental market environment more seamless and promoting the expansion of the market. The way the Rent Liability Guarantee Services are provided to tenants and landlords is that, in conjunction with the execution of a lease agreement for housing, Zenhoren executes a lease guarantee entrustment agreement with the tenant and a lease guarantee agreement with the landlord. Therefore, Zenhoren first enters into a guarantee service agreement with a real estate management company or real estate brokerage company that performs administrative work for leases; and through these companies, Zenhoren’s Rent Liability Guarantee Services are provided to tenants and landlords.

Zenhoren has actively engaged in sales activities targeting Cooperating Companies through its headquarters and sales offices primarily located in major cities across the country (19 locations at present). During the course of such work, Zenhoren developed services that bolster its credit, such as the introduction of the approximate estimate payment method; and through activities that meet the various needs of customers, Zenhoren has built a network of 53,615 Cooperating Companies (as of the end of December 2024).

Regarding the business environment surrounding Zenhoren, in the rental real estate market, despite a significant declining trend in Japan’s population, the number of single-person households (especially the elderly) and the number of foreign worker households are increasing; additionally, the average rent is on the rise. Furthermore, all these and other factors are expected to lead to a gradual expansion of the market.

On the other hand, competition in the rent liability guarantee industry continues to intensify; and given this situation, tenants, landlords and real estate companies are expected to become more selective about choosing rent liability guarantee service providers going forward. To ensure continued success in this business environment, Zenhoren seeks to overcome challenges such as smoothly providing guarantee for persons requiring special assistance in securing housing and adopting the digitization of society, thereby increasing the number of contracts, raising unit prices, achieving advanced liability management and enhancing operational efficiency to improve profitability; and Zenhoren believes that, through these efforts, it needs to solidify its presence in the rent liability guarantee industry.

Based on such recognition of the environment and with the aim of improving its corporate value further, Zenhoren unveiled a medium-term management plan for the three years from the fiscal year ending March 2025 to the fiscal year ending March 2027 in May 2024. Zenhoren is working toward implementing the following outlined in the Medium-Term Management Plan:

• strategies for the residential rent liability guarantee business, including strengthening alliances with regional banks and implementing measures that chiefly target the elderly;
• strategies for advancing and expanding into promising markets, such as commercial rent liability guarantees and tuition guarantees; and
• digital transformation strategies for improving internal operational processes, achieving greater efficiencies through digitalization, labor savings, and expansion of customer touch points through utilization of digital transformation.

Under these strategies, Zenhoren strives to expand its operations and aims in the fiscal year ending March 2027 to generate 30 billion yen in sales and 3 billion yen in recurring profit, as well as achieve market capitalization of 30 billion yen.

Meanwhile, the MUFG Group has set as its purpose “becoming a force that supports customers’ lives” in its retail business; and as a group, it provides various financial and payment services including bank deposits, loans, and credit cards to approximately 57 million individual customers. In conjunction with organizational restructuring under the new medium-term management plan that was formulated at the end of fiscal year 2023, which was the final year of the previous medium-term management plan, and started in fiscal year 2024, the group established the Retail & Digital Business Headquarters, which oversees domestic retail and SME operations. One of the group’s key strategies is to strengthen its domestic retail customer base; and through service enhancement, expansion of customer touch points through cross-selling, and evolution of the customer experience, the group seeks to maximize each customer’s lifetime value (LTV) while further expanding its customer base.

MUFG Group believes that by making Zenhoren a consolidated subsidiary, it can achieve the following synergies:

• Leveraging MUFG Group’s customer base: MUFG Group believes that referring Zenhoren to those MUFG Group business partners with which Zenhoren wishes to have a business collaboration (asset management and property management companies, funds, REITS, regional banks, etc.) will enable an expansion of the customer base and an increase in the number of contracting partners for the Rent Liability Guarantee Services using MUFG Group networks, contributing to improvement of Zenhoren's profitability.
• Utilizing MUFG Group credit: MUFG Group believes that by utilizing MUFG Group credit, Zenhoren can expect further enhancement of its corporate image and reputation and that expansion of Zenhoren’s customer base can be achieved.
• Increased product strength and expanded customer touch points through cross-selling: MUFG Group believes that by utilizing payment by credit cards issued and provided by MUFG Group and the diverse settlement methods provided by MUFG Bank and Mitsubishi UFJ Factors, which are part of the MUFG Group, in the Rent Liability Guarantee Services provided by Zenhoren, it will be possible for MUFG Group to provide convenient and beneficial services to users of the Rent Liability Guarantee Services and increase the strength of its products. MUFG Group further believes that the MUFG Group will be able to expand its customer touch points through cross-selling of Zenhoren's Rent Liability Guarantee Services and MUFG Group's own services with a focus on credit cards, as well as a corresponding increase in opportunities to capture new accounts and expanded opportunities to provide settlement solution services to Cooperating Companies.
• Cost reduction through higher business efficiency: Zenhoren has transactions with a large number of individual customers, and thus a tremendous amount of work in terms of contract administration, customer management administration, phone-calling, and other administrative operations, and for this reason is moving forward with measures for greater efficiency in administrative operations. MUFG Group believes that by sharing its knowledge and know-how regarding contract document management and other back office operations with Zenhoren, it will be possible to achieve cost reductions through more efficient administrative operations through reduction in work hours by Zenhoren employees, thereby contributing to improvement of Zenhoren’s profitability.

Please follow us to read more about Finance & FinTech in Japan, like hundreds of readers do every day. We invite you to also register for our short weekly digest, the “Japan FinTech Observer”, on LinkedIn, or directly here on the platform.

We also provide a daily short-form Japan FinTech Observer news podcast, available via its Podcast Page. Our global Finance & FinTech Podcast, “eXponential Finance” is available through its own LinkedIn newsletter, or via its Podcast Page.

Should you live in Tokyo, or just pass through, please also join our meetup. In any case, our YouTube channel and LinkedIn page are there for you as well.