Carlyle pursues take-private of Japan's Totoku Electric
The board of Japan-based electric wire manufacturer Totoku Electric has endorsed a tender offer from The Carlyle Group that values the company at approximately JPY 38.2bn (USD 261m).
The private equity firm is looking to acquire 6.7m shares for JPY 5,660 apiece, according to a filing. The minimum acceptance threshold for the offer to proceed is 4.49m shares, or a 66.6% stake. Furukawa Electric said in a separate filing that it would tender its entire 57.3% interest in Totoku.
The offer represents a 157% premium to Totoku’s November 7 closing price. The company’s stock jump 22.5% to JPY 2,715 on November 9 – propelling the market capitalisation to approximately JPY 18.5bn – before trading was suspended.
Founded in 1940, Totoku manufactures a variety of electric wires and heater products as well as cables, contact probes, and suspension wires. It went public in 1954 and became a consolidated subsidiary of Furukawa – a producer of fibre optic cables – in 2012.
Sales reached JPY 20.9bn for the 12 months ended March 2022, up from JPY 17.3bn a year earlier. Over the same period, net profit rose from JPY 1.84bn to JPY 2.35bn.
The company instigated a medium-term management plan in 2021 that narrowed its focus to four core markets: communication infrastructure, mobility, small transformers, and circuit boards and semiconductor inspection equipment.
Since then, it has come under pressure from rising costs of raw materials – notably copper and crude oil – with supply shortages leading to delayed fulfilment of orders. Totoku said that Carlyle could bring the capital and expertise required to survive the current economic uncertainty and push ahead with product development initiatives.
The private equity firm – currently deploying its fourth Japan buyout fund, which closed on JPY 258bn in 2020 – initiated the transaction by approaching Furukawa about a potential divestment.
Carlyle has previous experience with carve-outs of industrial businesses in Japan. In 2015, it acquired construction materials supplier Senqcia Corporation through a take-private that saw Hitachi Metals cede a majority stake. The GP revised pricing strategies, established new product offerings, and offload non-core business lines. It exited to Lone Star Funds earlier this year.
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