Covalent partial-exit marks end of an era

Now Carlyle and Unison are selling roughly half their stake in the company - which was renamed Covalent - to Taiwan-based solar wafer manufacturer Sino-American Silicon Products (SAS) for JPY35 billion ($455 million). As the last of the mid-2000s mega-deals to see a (partial) exit, to some it might feel like the end of an era.

Covalent has two major business units - silicon wafers and ceramics - and it is the former that is being sold to SAS. The silicon wafer business accounted for JPY40.9 billion of Covalent's JPY82.8 billion in sales for the fiscal year ended March. Operations are based in Niigata prefecture on the north-east part of Honshu Island and all staff and assets will be transferred to SAS by the end of the year.

Carlyle and Unison acquired approximately 92% of the company - split 50-50 - in 2006, including $509 million in debt. According to a Unison spokeswoman at Unison, there were no plans to break up the two business lines.

But industry sources tell AVCJ that the sale - at what appears to be a relatively low price - is no surprise. With the silicon wafer business generating returns of just 0.2%, it is suggested that Carlyle and Unison decided to get rid of the asset in order to focus on ceramics and improve the bottom line. Unison said it was committed to improving corporate value, but gave no further details on how this would be achieved.

Few, if any, of the 2006 mega-deals have delivered truly satisfactory returns. Skylark, a restaurant chain operator bought by Nomura Principal Finance and CVC Capital Partners for JPY256.5 billion - the year's leading high-leverage transaction - was sold in March to Bain Capital for around JPY280 billion, apparently barely covering the costs.

Advantage Partners ended up in court over its buyout of Rex Holdings, accused of unfair pricing. And Q'sai, a green juice maker bought by SMBC Ventures for JPY40 billion, ran into problems due to differences between owners and management over the exit strategy. The management team wanted the company to be sold to a buyer in its home region of Kyushu and in the end SMBC compromised, exiting to Kyushu-based Coca Cola West - though for a relatively uninspiring price of JPY35.9billion.

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• Topics
• Industrials
• Exits
• North Asia
• The Carlyle Group
• Unison Capital
• CVC Capital Partners
• Nomura Principal Finance
• Advantage Partners
• Daiwa SMBC Capital Asia Limited
• Bain Capital Asia