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Goldman to Divest Fujita Corp.

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The Goldman Sachs Group Inc. (GS - Analyst Report) is selling Fujita Corp. to Daiwa House Industry, according to a Reuters report. The deal comes on the heels of Goldman’s departure from its investments in Japan.

The deal penned with Daiwa, a Japanese home builder, will fetch Goldman 50 billion yen ($636 million). It had acquired Fujita in 2008 with investments of 45 billion yen that were made in two phases.

Following the burst of the bubble economy in Japan in the early 1990s, a number of foreign investors had forayed in the country with Goldman being one of the most aggressive. In particular, distressed companies were targeted and their businesses were turned over. This helped Goldman achieve capital gains.

However, lately the company is disposing those assets, partly or completely, and roping in millions. Last year, Goldman offloaded 45% of its stake in Accordia Golf, a golf course management company. It had invested in the company way back in 2002 and took it public in 2006.

Currently, it is left with two chief investments in Japan including USJ Co. that runs Universal Studios Japan in Osaka. The company also has a stake in a mobile phone operator named eAccess.

Concurrent with the second quarter 2012 earnings release, Goldman announced the divestment of Goldman Sachs Administration Services, a leading hedge fund administrator to State Street Corporation (STT - Analyst Report). The cash deal was valued at $550 million, subject to certain adjustments. The deal is anticipated to close early in the fourth quarter of 2012.

Over the long haul, we believe that Goldman’s fundamentals remain highly promising with a diverse business model and a strong balance sheet. Strategic sales would also rope in billions and help increase its financial flexibility. From the risk perspective as well, it is assured that the company would be able to withstand another financial crisis as Goldman cleared the severest stress test.

Goldman currently retains its Zacks #3 Rank, which translates into a short-term Hold rating. Considering the fundamentals, we also maintain a ‘Neutral’ recommendation on the stock.

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