KKR on Tuesday agreed to pay ¥498bn ($4.5bn) for Calsonic Kansei, a leading automotive component supplier, in a move that breaks the Japanese company’s longstanding and close ties with Nissan.
der its 41 per cent stake in Calsonic as part of the KKR takeover, and the deal will give the Japanese carmaker greater flexibility to work with new suppliers and thereby improve its competitiveness in the fast-developing markets for electric and self driving vehicles.
Calsonic, meanwhile, should be able to restructure and reduce its heavy reliance on the Nissan-Renault alliance for sales.
“Nissan is hoping to further increase the competitiveness of Calsonic Kansei, one of our most important partners,” said Yasuhiro Yamauchi, chief competitive officer at the carmaker. “This is also the best choice for Calsonic Kansei and its shareholders.”
The deal is KKR’s biggest ever transaction in Japan and ranks as the largest takeover of a Japanese industrial company by private equity.
KKR is offering ¥1,860 for each Calsonic share, inclusive of an anticipated special dividend of ¥570 — a 40 per cent premium to the target company’s share price on Monday.
Nissan is hoping to further increase the competitiveness of Calsonic Kansei, one of our most important partners
The deal ascribes an equity value to Calsonic that equates to 20 times its earnings forecast for 2016, or 2.3 times the stated book value of its assets.
Although the valuation is high, Calsonic is widely regarded as an attractive break-up opportunity, with industrial buyers likely to be interested in its product lines: from compressors to air conditioners and exhaust systems.
The company holds a near 41 per cent stake in Tokyo Radiator Manufacturing, another automotive supplier whose share price has doubled during the past few months, as investors realise that Calsonic’s new owners will be able to buy out other shareholders and secure control of Tokyo Radiator’s cash.
“Calsonic Kansei is a best-in-class auto-parts manufacturer that supplies high-quality products to the world’s largest automotive brands,” said Hiro Hirano, the head of KKR Japan.
Japan’s leading carmakers have historically maintained tight keiretsu bonds with their suppliers.
Calsonic secures about 86 per cent of its annual sales with the Nissan-Renault alliance in spite of recent efforts to diversify its client base.
But those links are coming under pressure as the electrification and automation of vehicles picks up speed.
Suppliers established around the internal combustion engine, such as Calsonic, are not necessarily well-placed to supply the technologies that Nissan needs.
Nissan had conducted an auction among private equity bidders — another rarity in Japan — and made possible in part because of Renault’s large stake in the Japanese carmaker.
Some bidders passed on Calsonic, saying it will be hard for the company to increase its sales with customers beyond Nissan, but Mr Hiro said KKR would assist in achieving growth ambitions.
KKR has pulled off some unusual deals in Japan, where selling to a private equity firm retains a stigma because of the imperative to protect workers who were promised lifetime employment.
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