Longreach agrees Christmas carve-out

The transaction - size was not disclosed but it should fall comfortably within Longreach's $50-250 million sweet spot - is a carve-out from Arrk Corporation, a computer-assisted design specialist that is unloading non-core assets. It is in keeping with the broader trend whereby Japanese conglomerates are eschewing broader portfolios in favor of focusing on certain industry verticals.

Yet this deal diverges from the norm because the ultimate seller is a government entity. Arrk embarked on an aggressive M&A strategy in the 2000s, expanding its consolidated subsidiaries 25-fold to 180 in eight years. Management was unable to cope and the company found itself brutally exposed by the global financial crisis.

The Enterprise Turnaround Initiative Corporation of Japan (ETIC) - now known as the Regional Economy Vitalization Corporation of Japan (REVIC) - rescued Arrk in 2011 through a debt-for-equity bailout. It is now in the process of exiting the entire company. Longreach was comfortable dealing with the seller, having bought OCC Corp. from ETIC's predecessor in 2006.

"We have a good track record with them," says Mark Chiba, Longreach's chairman and partner. "In addition to long-term advisory discussions and being in the loop in terms of deal sourcing I believe that we are seen as a safe pair of hands."

The PE firm won out in a limited auction process and the transaction is scheduled to close at the end of January.

Sol-Plus specializes in mold design, tooling and manufacturing, and in mass production of plastic parts, principally supplying Japanese customers in the automobile and consumer sectors. Its products are most commonly used in the housing for car GPS and auto navigation systems as well as audio systems. Industry sources say the company has sales of approximately JPY6 billion ($57 million) per year.

Longreach will fully acquire Sol-Plus and Yasuda Seisakusho, as well as a 99% stake in Thai subsidiary Hirai Seimitsu. All of Sol-Plus' manufacturing takes place in Thailand, which is has been a growing outpost of Japan's auto industry for more than a decade.

According to the Thailand Automotive Institute, the country produced 2.45 million autos in 2012, of which 1 million were exported, making it the world's seventh-largest vehicle exporter. Toyota, Isuzu and Honda are said to be the leading domestic manufacturers.

"We think the business still has upside, particularly as some of its customers are recovering after the global financial crisis," Chiba adds. "If you are well positioned with good customer relationships clustering around you, it's a very interesting business to be in."

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