PAG backs Chinese-led acquisition of Japan's Takata
PAG Asia Capital has supported Chinese-owned auto components manufacturer Key Safety Systems (KSS) in its $1.59 billion acquisition of assets held by Takata Corporation, a Japanese company that filed for bankruptcy following a recall of faulty vehicle airbags.
The private equity firm has become the second-largest shareholder in KSS, which will be rebranded as Joyson Safety Systems (JSS). Shanghai-listed Ningbo Joyson Electronic Corporation remains the majority equity holder. It bought KSS – then a US-based producer of airbags, steering wheels and seatbelts with considerable exposure to China – from FountainVest Partners for $920 million in 2016.
The Takata transaction was funded using a combination of equity and debt. Joyson and PAG’s consortium partner is the Future Industry Investment Fund, a vehicle that focuses on advanced manufacturing technologies. It is run by SDIC Fund Management, a GP under China’s State Development & Investment Corporation that manages capital for a range of government-linked investors.
Takata’s problems began in 2007 with malfunctions in airbags it had manufactured, which resulted in the inflator components rupturing and sending metal fragments flying. The inflators have been linked to at least 16 deaths and 180 injuries globally. From 2008, automakers made a string of vehicle recalls.
In 2017, the company, which employs around 46,000 across 56 plants in 20 countries, reached a plea agreement with the US Department of Justice that included a $25 million fine, a fund of $125 million to cover liabilities arising from personal injury claimants, and an $850 million payment to automakers that had bought Takata airbags. It subsequently filed for bankruptcy protection.
KSS signed a definitive agreement last November to buy the bulk of Takata’s assets out of cross-border bankruptcy in the US and Japan, excluding liabilities associated with the airbag inflators. The combined business has operations in 25 countries, with more than 50,000 employees and annual sales of approximately $7 billion.
“PAG has a long track record of working with our partners to build successful companies,” said Weijian Shan, chairman and CEO of PAG, in a statement. “The combination of KSS and Takata creates a best-in-class business with strong growth potential. We’re committed to working with Joyson Safety Systems to build an industry-leading company.”
The firm is currently deploying its second pan-Asian fund, which closed at $3.66 billion in 2015. PAG’s previous experience working on cross-border deals includes the 2016 acquisition of US-based Lexmark International for $3.6 billion in conjunction with Chinese corporate Apex Technology. It also helped create a global property brokerage platform that comprises Cushman & Wakefield, DTZ, and Cassidy Turley.
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