Panasonic unit gets KKR cure
KKR's acquisition of Panasonic Healthcare marks a return to form for the firm after its earlier efforts to acquire Japanese chipmaker Renesas were frustrated by the government-backed Innovation Network Corporation of Japan (INCJ). The deal had raised concerns in the industry over unfair government-linked competition and even to conjecture that this next deal would actually see KKR team up with INCJ or one of its equivalents.
These rumors proved unfounded. KKR has sealed its largest Japan buyout to date, taking an 80% stake in Panasonic's healthcare unit for JPY165 billion ($1.66 billion). It is close to five times the size of the firm's second-biggest investment, Intelligence Holdings, which was exited earlier this year.
The investment also weighs in as the 10th largest private equity buyout Japan has seen, ironically just behind the INCJ-led bailout of Renesas, which was valued at $1.67 billion.
The sale process dates back to March when Panasonic, under pressure to jettison assets, announced it was seeking a partner to assist the future growth of the unit. Around 10 private equity firms and a handful of strategic investors were said to have entered first-round bids, including Toshiba Corp. and a consortium including Bain Capital, Mitsui & Co and the Development Bank of Japan (DBJ).
Last month it emerged that KKR had obtained preferential negotiating rights.
Panasonic Healthcare claims to be the leading global manufacturer of blood glucose monitoring meters and sensors used to monitor diabetes. Its Medicom business, meanwhile, is the domestic market leader for medical receipt computers, electronic health record systems and other IT equipment. The company is also strong at home and overseas in biomedical laboratory equipment such as carbon dioxide incubators and ultralow temperature freezers.
"Panasonic Healthcare has excellent market positions and high-level technical capabilities, and we believe it has significant growth potential," said KKR co-founder and co-CEO Henry Kravis, in a statement.
According its president, Kenji Yamane, Panasonic Healthcare now aims to accelerate growth by building out its global sales channels to major overseas healthcare facilities, while leveraging KKR's networks. The unit generated JPY8.7 billion in operating income and JPY134.3 billion in sales for the financial year ended March 2013. The operating profit margin was 6.5%.
Panasonic, which will continue to hold 20% of the healthcare unit, has not fared so well in recent times, posting combined losses of $15 billion over the last two financial years.
This prompted the vast restructuring efforts that led to the sale of the healthcare unit and number other assets, including Sanyo Electric's digital camera business, which was sold to domestic mid-market buyout firm Advantage Partners in December.
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