Bain pursues $824m buyout of Japan's Showa Aircraft Industry
Bain Capital has submitted a tender offer for Showa Aircraft Industries, a Japanese manufacturer that specializes in paneling for aircraft interiors, that values the business at JPY90 billion ($824 million).
The private equity firm is offering to buy all outstanding shares for JPY2,760 apiece, including a dividend payment of JPY631, according to a filing. It has already entered into a purchase agreement with shareholders representing 65.53%, among them majority owner Mitsui E&S Holdings. Bain needs to reach 66.67%, or 21.7 million shares) for the offer to proceed.
Showa Aircraft Industries was founded in 1937 as a manufacturer of aircraft and related vehicles. In 1960, the company signed a technical licensing agreement with US-based Hexcel Corp. to produce metal honeycomb cores. These cores, known for their light weight and structural resilience, have numerous industrial applications and remain the company’s flagship product. They are commonly used in satellites and in aircraft interior paneling.
Showa Aircraft Industries also produces aircraft galleys and refuelers and service vehicles. In addition, there are several ancillary business interests, such as real estate development, hotel and fitness center management, a Harley-Davidson dealership, and a sauna and stove retailer.
Sales for the 12 months ended March 2019 came to JPY25.4 billion, up from JPY24.3 billion the previous year, while net income rose from JPY1.97 billion to JPY1.25 billion.
The company released a three-year plan in 2018 that outlined goals to increase sales and improve profit margins by expanding its product range in the transportation segment. However, it noted that cost competition in the aircraft market and reduced demand for fossil fuel-powered vehicles were impeding business growth. The increase in sales last year was credited to the launch of a real estate leasing operation.
Mitsui E&S launched a bidding process in July 2019, having been approached by multiple parties about the potential sale of Showa Aircraft Industries. Several bidders progressed to a second round in September, which was followed by a full-scale due diligence period. Bain was selected as the preferred bidder in late December.
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