KKR acquires Panasonic healthcare unit for $1.67b

The sale process came about after Kazuhiro Tsuga, president of Panasonic, said in March that the company was seeking a partner with the medical knowledge and capital to assist the future growth of the unit. In May, around 10 private equity firms and a handful of strategic investors were tipped to enter first-round bids.

Toshiba Corp. and a consortium including Bain Capital, Mitsui & Co and the Development Bank of Japan (DBJ) were reportedly in the running up until earlier this month when it was revealed KKR had obtained preferential negotiating rights.

Panasonic Healthcare claims to have the leading global market share in the manufacture and sale of blood glucose monitoring meters and sensors for diabetics. Meanwhile, its Medicom business has the top market share in Japan for medical receipt computers, electronic health record systems and other IT equipment for medical clinics.

The company also has a successful line in biomedical laboratory equipment - including carbon dioxide incubators and ultralow temperature freezers - both in Japan and overseas. Panasonic Healthcare generated JPY8.7 billion ($87 million) in operating income and JPY134.3 billion in sales for the financial year ended March. The operating profit margin was 6.5%

According to a release, Panasonic - which continues to hold 20% of the healthcare unit - will cooperate with KKR in the management of the company with each leveraging their respective business resources.

"Looking ahead, we aim to accelerate growth by building out our global sales channels to major overseas healthcare facilities, aided by KKR's overseas network, and delivering to customers around the world an enhanced range of products and services," said Panasonic Healthcare President Kenji Yamane in a statement.

The sale is one of a number of divestments made by distressed parent Panasonic, which posted combined losses of $15 billion over the last two financial years, prompting a vast restructuring effort. Other divestments include the sale of the digital camera business of Sanyo Electric - another Panasonic unit - to domestic mid-market buyout firm Advantage Partners in December.

Panasonic is not the only large Japanese corporate considering divestments of non-core assets. In August, North Asia mid-market buyout firm The Longreach Group agreed to buy precision drilling business Hitachi via Mechanics from conglomerate Hitachi.

KKR - which recently raised a $6 billion Asia fund - has already expressed its interest in seeking out more buyout opportunities in Japan. In April, the buyout firm appointed Hirofumi Hirano, a turnaround expert, as the chief executive of its Japan office and strengthened its Tokyo team by hiring two directors from Goldman Sachs and McKinsey & Co.

"Japan is a very important and attractive market for KKR, and our experienced team on the ground in Japan looks forward to leveraging KKR's global expertise and experience to make this a highly successful partnership," said KKR co-founder and co-CEO Henry Kravis.

The deal is still subject to approval by the relevant authorities and other customary closing conditions with the agreements being completed by the end of March 2014.

 

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• Topics
• North Asia
• Buyouts
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• KKR
• Advantage Partners
• The Longreach Group Limited
• Japan
• healthcare
• Technology