Bain-led consortium closes tender for Japan's Hitachi Metals

Bain and its partners, including Japan Industrial Partners (JIP) and Japan Industrial Solutions (JIS), will move forward with delisting and changing the company’s name to Proterial. They described the transition as an opportunity to drive transformation and growth – and make large investments – under a development plan that isn’t “constrained by Hitachi's portfolio strategy.”

It is the second-largest private equity buyout completed in Japan, trailing only the Bain-led acquisition of Toshiba Memory Corporation for JPY 2trn in 2018, although yen depreciation means the value of the deal in US dollar terms has fallen by 25% since the bid was announced.

Hitachi agreed to sell its 53.4% stake in Hitachi Metals to the consortium for JPY 1,674 per share. Simultaneously, the consortium made a tender offer to the remaining public shareholders priced at JPY2,181 per share. At least 56.8m shares out of the 199.3m not owned by Hitachi needed to be tendered for the offer to proceed. According to a filing, 152.2m shares were tendered.

The transaction differs from other tender offers through which Japanese corporates have divested listed subsidiaries in that Hitachi is not reinvesting in the acquisition vehicle.

One of the reasons the process has dragged on for 18 months is the need for approvals from anti-monopoly authorities in the jurisdictions where Hitachi Metals operates. Chinese authorities signed off on the deal in September.

Hitachi Metals produces speciality steel, functional components, magnetic materials, power electronics, and wires and cables. Revenue for the 12 months ended March 2022 came to JPY 942.7bn, up from JPY 761.6bn a year earlier. Over the same period, the company swung from a net loss of JPY 42.6bn to a net profit of JPY 11.9bn.

“Hitachi Metals has decades of R&D leadership, deep global relationships with industry-leading customers, and technological superiority in each of its businesses. We are pleased to leverage our experience in the global and Japan industrials and technology sectors to support Hitachi Metals, a leading Japanese company,” David Gross-Loh, a managing director at Bain, said in a statement.

Private equity interest in carve-outs from Japanese corporates continues unabated. Transactions of this type account for six of the seven largest buyouts – pending or completed – in the country. Four of them have come in the last 24 months.

One pending deal also involves Hitachi. KKR agreed to buy the parent’s stake in Hitachi Transport Systems in April and then launched a tender offer for the remaining shares at a valuation of JPY 749.5bn. In that instance, Hitachi will be awarded a 10% interest in the acquisition vehicle.

Recent activity from Bain Capital includes an agreement to buy medical devices manufacturer Evident from Olympus Corporation for JPY 427.7bn. The GP is reportedly also in the running for Toshiba Corporation, which is expected to sell for JPY 2trn. Toshiba received eight privatisation bids and two minority investment proposals, most of them backed by financial sponsors.

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• Topics
• North Asia
• Buyouts
• Industrials
• Japan
• Bain Capital Asia
• Japan Industrial Partners
• manufacturing
• Japan Industrial Solutions (JIS)