Carlyle, Unison to exit Japan semiconductor firm Covalent
The Carlyle Group and Unison Capital are to exit their stake in Covalent Materials, a Japanese semiconductor materials manufacturer, to US ceramics group CoorsTek.
The deal - for which Carlyle and Unsion were reported have lauched an auction process in May - includes debt and bonds and is understood to be worth more than JPY50 billion ($416 million).
The amount falls short of the JPY91 billion the PE firms paid for a 92.32% stake when they acquired the company - then Toshiba Ceramics, a unit of Toshiba Group - in a carve-out deal alongside company management in 2006.
The investment has been a troubled one. In 2012, Covalent nearly defaulted on its debt after a decline in earnings meant it was unable to repay bonds dating back to the acquisition; it was only saved after striking a last minute deal with creditors.
Revenue for the year ended March was JPY31.5 billion, less than a third of the total six years ago. This is partly due to the fact that the company sold its silicon wafer business to Taiwan's Sino-American Silicon Products for $360 million in 2012 to help pay off its debt. This deal represented a partial exit for Carlyle and Unison.
The company's net debt currently stands at JPY7.6 billion, down from JPY50 billion in 2008.
The investment came via Carlyle second Japan fund, which intially received commitments of JPY215 billion ($2.2 billion) in 2006 before the corpus was reduced to JPY165.6 billion. As of March 2014, the fund had delivered a net multiple of 0.9x and a negative IRR, according the the California Public Employees' Retirement System.
Carlyle is now raising its third Japan fund, which passed the halfway mark in October with approximately $600 million raised predominantly from domestic investors.
The exit - announced on Carlyle's website - is set to be finalized on on December 26. The deal represents one of the last remaining exits dating back to the Japan pre-crisis buyout boom that peaked in 2007 with $11.4 billion transacted over 65 buyout deals. By comparison, 2014 has so far seen $3.9 billion invested across 34 deals, while 2013 saw 46 deals and total commitments of $4.8 billion.
Other recent exits dating back to this era include MBK Partners' sale of accounting software firm Yayoi to Orix Corp. for JPY80 billion ($692 million) last month, and Permira's October exit from agricultural chemicals maker Arysta LifeSciences to US-based Platform Specialty Products.
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