KKR completes Panasonic Healthcare deal, eyes bolt-ons
KKR has completed the acquisition of an 80% stake in Panasonic Healthcare, its biggest buyout in Japan to date. According to a source familiar with the situation, operations unit KKR Capstone is already working with the company and a number of bolt-on acquisitions are being considered.
The deal, worth JPY165 billion ($1.67 billion), was announced last September and followed a decision by parent company Panasonic to seek a partner with medical knowledge and capital to assist the future growth of the business. Panasonic retains a 20% interest in the healthcare unit.
It is said to be the first time a leading conglomerate like Panasonic has sold off a profitable business to a PE investor. Hiro Hirano, CEO of KKR Japan, told AVCJ last December that assets were previously deemed non-core because they were losing money.
Panasonic concluded that because it didn't have a global healthcare network, a third-party investor would be better equipped to take the business forward.
Panasonic Healthcare claims to have the leading global market share in the manufacture and sale of blood glucose monitoring meters and sensors for diabetics. It accounts for roughly half of the company's EBITDA. The other two business lines - biomedical laboratory equipment and medical information systems - each contribute about 25% of EBITDA.
The company generated JPY8.7 billion in operating income and JPY134.3 billion in sales for the financial year ended March 2013. The operating profit margin was 6.5%.
Panasonic Healthcare is still establishing its strategic priorities in terms of streamlining the business, which may involve cost-cutting and improvements to operational efficiency. An element of inorganic growth is likely, whether it is vertical acquisitions of distributors or lateral purchases to broaden the product range.
The company has manufacturing facilities overseas and sales and marketing resources in Europe and the US, but it has yet to make acquisitions overseas. "That is one of the reasons KKR was looked at by the seller," the source added. "They knew they needed a global partner to help with cross-border M&A."
Japanese companies have often struggled to integrate domestic and international operations following overseas acquisitions.
"We understand KKR has been actively investing in the expanding healthcare sector, and we highly respect KKR's industry expertise and its capability to provide the necessary growth capital and operational know-how, in preparation for the future development of Panasonic Healthcare in the global healthcare industry," said Kazuhiro Tsuga, president of Panasonic, in a statement released to announce the completion of the deal.
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