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U.S. Ripplewood steps up Japan buying spree

Yahoo Finance, 05.09.01
By Miki Shimogori

TOKYO, May 9 (Reuters) - Acquisitive U.S. investment fund Ripplewood Holdings stepped up its Japanese buying spree on Wednesday, with plans to take minority control of leading audio and music software company Nippon Columbia Co Ltd.,

Ripplewood, which grabbed headlines last year by becoming the first foreign firm to buy a Japanese bank, will pay some 11 billion yen ($91 million) for a 42 percent stake in the Japanese firm, Nippon Columbia said.

Nippon Columbia, owned nearly 20 percent by the group of electronics giant Hitachi Ltd , said that an investment fund to be created by Ripplewood will pay five billion yen to buy the stake and nearly six billion yen to buy Nippon's hardware division, which will be spun off in October.

The deal comes as foreign investors increasingly look to buy up stakes in Japanese companies whose values have been weakened by a decade-long economic slump -- an unthinkable trend until recently.

Ripplewood blazed a trail for other foreign buyers last year when it led a consortium that purchased failed Long-Term Credit Bank of Japan (LTCB), later reborn as Shinsei Bank.

Its move for Nippon Columbia follows news last month that it it will buy Japanese automaker Nissan Motor Co's 40 percent stake in auto-parts maker Niles Parts Co.

"We will do more," Jeffrey Hendren, Ripplewood managing director, told Reuters on Wednesday, saying that his company is interested in buying more firms in the auto parts and other Japanese industrial sectors including technology.

"Endless, tough changes have been required to revitalise these companies," he said. "Our plan is to go and restructure companies, add more people, get sales going, so I'm hoping that'll be an example of the kind of thing that is going to take the economy out of the lost decade."
SOUGHT FOREIGN HELP

Shares in the 90-year-old Nippon Columbia, which also makes music CDs and karaoke systems, jumped 25.79 percent to 239 yen on a report that Ripplewood would buy into the Japanese company, and were later suspended.

Investors remained sceptical whether the rally will last long.

"There won't be a rush to buy loss-making firms just because there will be changes in ownership and structure. Dealers and individuals may react to that sort of thing, but not many institutional ones," said a strategist at a fund management firm.

Nippon Columbia, mired in ten straight years of group net losses, said it had to secure funds for a much-needed restructuring and repay debts in order to stay afloat.

"We hope to revitalise our business with a new capital infusion under new management tactics,'' Nippon Columbia president Tadahiko Shinohara told a news conference, saying the company hopes to be back to the black in three years or so.

Ripplewood appointed Strauss Zelnick, a former chief executive of German media group Bertelsmann AG's music division, to head the new management of the reborn Nippon Columbia.

Nippon Columbia, burdened with 25 billion yen in debt, will raise a total 16 billion yen via the spin off and the allocation of new common and preferred stocks to Ripplewood and Hitachi.

A Ripplewood-led fund will purchase 76.92 million shares of Nippon Columbia's preferred stock for about five billion yen. The preferred stocks, to be issued at 65 yen per share in October, can be converted into common stocks.

Hitachi will inject a total 5.14 billion yen into Nippon Columbia by buying 15.38 million of the firm's new preferred stocks and purchasing 21.8 million of the firm's new common stocks, due to be issued at 190 yen per share in July.

As a result, the Ripplewood fund, of which 80 percent will be financed by Ripplewood itself, will take a 41.7 percent stake in the Japanese company, while Hitachi will take about 27.5 percent, company officials said.

Ripplewood will buy a 98 percent stake in the new audio equipment company to be created through the spin-off for six billion yen. Hitachi will take the remaining stake.

The new company, which will deal in Denon-brand audio products, will be capitalised at 500 million yen. It will inherit about 23 billion yen in assets and 10.27 billion yen in debts upon the spin-off.
(Additional reporting by Kiyoshi Takenaka)