J-Star looks to construction for its 12th deal

The deal’s valuation has not been disclosed, though the investment, made through J-Star Number One Investment LLP, buys the firm approximately two-thirds of THY’s overall shares. J-Star additionally aims to increase its stake size in THY over time.

The investment is in line with J-Star’s wider strategy as the firm targets growth opportunities linked to infrastructure, which is an area that has seen increasing demand. THY is recognized as a leader in its niche, claiming JPY14 billon ($174.2 million) of consolidated sales in FY10. It operates several manufacturing plants in both Japan and China. It supplies machinery products to major global construction firms in these geographies and areas such as Korea and Europe. J-Star aims expand THY’s overseas presence in emerging countries such as India and Indonesia, in addition to one of its core markets, China.

J-Star’s Director and President George Hara said the company holds high growth potential given its strong presence in China, where the majority of its products are produced. Hara said THY’s sustained performance in 2008 amid the economic crisis proved the company’s resiliance.
J-Star has said that it first became involved with THY through an introduction by Sumitomo Trust Bank, which thought the two partners should make a good match.

As THY has previously placed much of its emphasis on its overseas development, Hara said J-Star hopes to create value-add in other key areas, such as developing executives’ management skills, the company’s overall business strategy, and beefing up THY’s manpower. These categories are typical hurdles that SMEs generally face.

However, THY’s overseas ambitions is still key to J-Star’s strategy. “I think it is important to find local management who has knowledge of the industry and operational skills rather than deploying or hiring high-cost Japanese management,” Hara said, noting that domestic brands tend to send Japanese executives to manage their overseas offices, which may end up hindering these companies’ chances of success abroad, especially in emerging countries. THY has also done this in the past, and J-Star will now seek local talent to help with management.

Deloitte Tohmatsu FAS served as financial advisor, while Baker & McKenzie acted as the legal advisor on the deal. Maruhito Kondo Law Office also provided legal counsel - including legal due diligence work - for THY’s subsidiaries in China. 

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