Carlyle abandons pursuit of Japan Asia Group

Carlyle and Tetsuo Yamashita were willing to buy all outstanding shares for JPY1,200 apiece, valuing the JAG at JPY32.9 billion ($315 million). On completion, JAG would facilitate Carlyle's acquisition of controlling interests in two subsidiaries for JPY15 billion. However, only 10.4 million shares – or 38% - were tendered, short of the 17.9 million required for the deal to proceed, according to a filing.

JAG’s stock closed at JPY1,270 on February 10. It reached JPY1,326 on February 5 after City Index Eleventh, an investment firm with ties to activist investor Yoshiaki Murakami, submitted its own bid of JPY1,210 per share. City Index Eleventh, which already owns 20.47% of JAG, has set no minimum acceptance level.

The activist investor had already prompted Carlyle and Yamashita to double their original offer of JPY600 per share, submitted last November. Carlyle increased its overall contribution to the deal, but most of the additional equity came from Yamashita. City Index had claimed the original bid was unreasonably low and that the deal would enrich Yamashita at the expense of other shareholders.

The two subsidiaries Carlyle had agreed to acquire included Kokusai Kyogo, a provider of satellite and aerial imaging as well as terrestrial, water and subterranean surveying services. It is JAG’s main revenue driver. The other business is JAG Energy, which manages solar power stations and provides development and maintenance services to clients in Europe.

The remaining assets – Xacti, a manufacturer of cameras used on construction sites, in transport surveillance, and by security personnel, and extensive forestry holdings – would have been transferred to Yamashita.

JAG generated JPY97.9 billion in sales for the 12 months ended March, down from JPY102 billion the previous year. Over the same period, it swung from a net loss of JPY2.5 billion to a net profit of JPY1.99 billion.

Activist investment activity is growing in Japan, which some industry participants expect to benefit private equity as companies become more willing to consider privatizations or asset sales that avert such threats. On the other hand, activist investors have blocked or drawn-out PE-backed privatizations by pushing for better terms, Murakami among them.

Funds linked to Murakami are said to have been instrumental in thwarting Bain Capital’s pursuit of printing and IT services provider Kosaido in 2019. Meanwhile, Bain saw off a hedge fund challenge to its acquisition of aged care provider Nichii Gakkan and KKR did the same for high-tech manufacturer Hitachi Kokusai Electric. Both had to sweeten their offers.

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• Topics
• North Asia
• Buyouts
• Cleantech
• Japan
• The Carlyle Group
• activist investor