Carlyle buys Japan advertising business
The Carlyle Group has completed its acquisition of Japanese advertising content provider AOI TYO Holdings follow a tender offer that valued the Tokyo-listed company at JPY21.4 billion ($191 million).
Working in conjunction with Yasuhito Nakae and Hiroaki Uekubo, AOI TYO’s CEO and COO, respectively, the private equity firm submitted an offer of JPY900 per share on May 14. This represented a 52.8% premium to the previous closing price.
The minimum acceptance level for the tender to proceed was 15.8 million shares, or 65.5%. Investors representing 19.7 million shares supported the transaction, according to a filing, allowing Carlyle to push for full ownership. Nakae and Uekubo rolled over small minority interests.
Founded in 1963, AOI TYO has two main business lines. First, video content production – chiefly for advertising – through the likes of AOI Pro, TYO, and Tree Digital Studio. There are also various subsidiaries in Southeast Asia and China. Second, advertising and marketing design across video, digital, PR, and events. Xpd is the principal brand in this area.
Making a case for the take-private in an earlier filing, AOI TYO noted that its industry is in transition, with a decline in traditional TV-based advertising and refocusing on digital media, including video. Nakae and Uekubo explored ways in which to support the company through this period, and they were introduced to Carlyle by a corporate advisor in 2019.
The business environment deteriorated with the onset of COVID-19 as shooting projects were postponed and editing studios were temporarily closed. There was also a general tightening in advertising expenditure, while the shift to digital accelerated. A strategic restructuring was necessary to stem losses, which led to deeper engagement with Carlyle.
AOI TYO recorded revenue of JPY51.1 billion in 2020, down from JPY65.2 billion the previous year. EBITDA shrank from JPY3.6 billion to JPY422 million, while an operating income of JPY2.1 billion became an operating loss of JPY727 million. The net loss widened from JPY1.3 billion to JPY2.6 billion.
The company will work with Carlyle on developing its digital media capabilities to cater to a wider variety of advertiser needs. There are plans to bring in new talent, commit capital to augmented reality and virtual reality technologies, and make strategic investments in content.
“AOI TYO has established a solid position as the top player in high-quality video production. As the media industry undergoes such fast change, we are honored to have been chosen to partner AOI TYO as it moves to its next phase of growth,” Jumpei Ogura, a managing director at Carlyle, said in a statement.
The private equity firm is currently deploying its fourth Japan buyout fund, which closed on JPY258 billion in early 2020.
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