Carlyle launches tender offer for Japan's Iwasaki Electric

The private equity firm has won board support for a proposal to acquire 7.35m shares, or a 94% stake, for JPY 4,460 apiece, according to a filing. There is a minimum acceptance level of 4.9m shares. The price represents an 83% premium to Iwasaki’s closing price on February 3. The stock closed up 21% at JPY 2,996 on February 7, giving the company a market capitalisation of about JPY 21.3bn.

Yoshitake Ito, president and CEO of Iwasaki, has agreed to sell a portion of his holding – currently 0.5% - through the tender and roll over the rest. He will continue to run the company post-acquisition. Carlyle will commit JPY 13bn in equity to the transaction, and the firm has secured JPY 20.9bn in debt financing from Sumitomo Mitsui Banking Corporation.

Founded in 1944, Iwasaki produced Japan’s first incandescent reflect light bulb. It went public in 1961. The current strategic focus is lighting solutions for facilities and industrial applications. In addition to sports stadiums and hospitals, its products feature in factories, information display systems and billboards, road tunnels, landscape settings, and water treatment systems.

High-intensity discharge lighting products still account for 30% of sales, but these are expected to be phased out within 50 years with increased penetration of LED solutions. Iwasaki’s principal business drivers include a need for solutions that reduce energy costs and government-mandated uptake of LED.

Iwasaki has also developed an environmental testing business line and its ultraviolet lamps were used to render coronavirus strains inactive in air conditioning systems.

Nevertheless, the pandemic, deteriorating macroeconomic conditions, and rising energy prices – especially in Europe, a key export market – have hurt the company. Prices of lighting fixtures are also in long-term decline and overall demand is falling due to the introduction of longer-life products.

Iwasaki resolved to pursue growth by investing in R&D with a view to concentrating on higher-value solutions and expanding its overseas business. Progress was limited, which led the company to contemplate a more comprehensive restructuring – including delisting and working with external partners that can offer capital and expertise.

Revenue reached JPY 53.2bn for the 12 months ended March 2022, down from JPY 53.6bn a year earlier. Over the same period, net profit rose from JPY 2bn to JPY 2.3bn.

Prior to 2016, private equity investors seldom featured in tender offers in Japan. However, more than 20 have been announced since 2020 with aggregate value exceeding USD 21bn, according to AVCJ Research.

At the large end of the spectrum, they are increasingly a feature of corporate carve-outs, whereby the PE investor agrees to buy the parent company’s stake in a listed subsidiary and then launches a tender offer to take out other shareholders. However, there are plenty of smaller-scale opportunities around business transformation, as exemplified by the Iwasaki situation.

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• Topics
• North Asia
• Buyouts
• Industrials
• Japan
• The Carlyle Group
• manufacturing