Integral pursues $316m buyout of Japanese software developer

The private equity firm is offering JPY1,499 per share for all outstanding shares, roughly on par with the January 29 closing price. The stock peaked at JPY1,879 last October but had sunk to JPY1,407 by mid-December. It closed down 6.3% at JPY1,404 on January 30.

Norio Ogiwara, the chairman of Mamezou, has agreed to sell his 18.54% stake through the tender process. However, he will also invest in the new holding structure and remain involved in the business. Integral needs to accumulate a 66.67% position, or 12.16 million shares, for the offer to proceed, according to a filing.

Mamezou was founded in 1999 and listed on the Tokyo Stock Exchange five years later. Its eponymous product is an enterprise platform that provides customized systems integration services and related training. Other brands include Open Stream, Nextscape, Foster NFT, JM Technology, Sense Things Japan, Neutral, Kowamex, NT Solutions, and Robon. Functions range from server and network construction to semiconductor manufacturing and data analysis.

The company noted that recruiting and retaining qualified engineers – at a time when competition for talent is intense – is the biggest challenge to ensuring products keep up with innovations in areas such as big data, artificial intelligence, and robotics. It wants to move away from a business model where sales are a function of headcount and hours worked. This means investing in digital transformation and talent.

Integral approached Ogiwara last summer and started to discuss a sustainable long-term plan for Mamezou. This resulted in an agreement to pursue a management buyout and return the company to private ownership, making it easier to bring about significant changes in structure and strategic positioning.

Mamezou generated sales of JPY24.4 billion for the 12 months ended March 2019, up from JPY23 billion a year earlier. Over the same period, net profit rose from JPY1.44 billion to JPY1.66 billion.

Integral is currently deploying its third Japan mid-market buyout fund, which closed at JPY73 billion in 2017. The firm differs from most other Japanese GPs in that it puts balance sheet capital – referred to as “deal-inducing investment” – into transactions alongside fund capital. It also has a dedicated corporate value enhancement team.

Recent investments include the JPY50 billion carve-out of a subsidiary of Tokyo-listed refrigerator supplier Sanden Holdings Corporation, the acquisition of conveyor belt parts manufacturer JRC, and a JPY28.3 billion buyout – through a tender offer – of fertilizer producer Nitto.

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• Topics
• North Asia
• Buyouts
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• Japan
• Integral Corp.