Longreach to buy majority stake in Japan's Fujitsu Component

This will be the second deal from the private equity firm's third fund, which reached a third close earlier this year of more than $400 million and has an overall target of $650 million. The first investment was also a corporate carve-out, with Longreach buying coffee shop chain Kohikan Corporation from UCC Foodservice Systems.

Longreach is offering to buy all outstanding shares in Fujitsu Component – excluding those held by parent company Fujitsu – for JPY935 apiece, which represents a 11.2% premium to the July 25 closing price, according to a filing. Fujitsu Component's stock gained 10.94% during trading on July 26 to close at JPY933, the highest level in four months.

Fujitsu owns 11.2 million shares in the company, or a 76.27% stake. Of the remaining 3.43 million shares being targeted in the tender, Longreach needs to acquire at least 1.71 million for the deal to proceed. If the tender is successful, there will be a reverse share split and Fujitsu Component will acquire half of its parent's interest for JPY765 per share and issue new shares to Longreach. These transactions will result in the PE firm having 75% of the voting rights in Fujitsu Component, with Fujitsu holding the balance.

Fujitsu Component manufactures switching devices such as relays and connectors, as well as touch panels and keyboards, and a range of other electronic products. The company was established in 1995 as a joint venture between Fujitsu and Takamisawa Electric and then restructured and listed in 2001.

The divestment was driven by Fujitsu's decision in late 2015 to concentrate on technology solutions, notably the advance of the internet of things (IoT). Subsidiaries involved in device manufacturing were to be spun out as independent entities.

Sales reached JPY49.4 billion last year, up from JPY48.7 billion in 2016, while net profit fell 57.3% year-on-year to JPY200 billion. The bulk of Fujitsu Component's revenue comes from relays and control units supplied to the automotive sector, especially the electric vehicles segment. Longreach plans to support further growth in these areas.

The GP operates across North Asia, with a particular focus on Japan, pursuing deals in the $50 million to $250 million range. Fund II closed at $400 million in 2011. It has a history of carving out assets from Japanese conglomerates, including several industrial manufacturing businesses. Sanyo Electric Logistics was bought from Panasonic in 2010 and sold to Mitsui Soko 18 months later, while Hitachi Via Mechanics and Sol-Plus Group were acquired from Hitachi and Arrk Corporation, respectively.

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• Topics
• North Asia
• Industrials
• Buyouts
• Japan
• The Longreach Group Limited
• manufacturing