Japan’s second-largest car maker said it will sell its 41% of Calsonic Kansei to private equity firm KKR for Yen206.9 billion ($ 1.87 billion), based on KKR’s offer of Yen1,860 ($ 16.78) a share – a 28% premium to the November 22 closing price. KKR said it plans to make an offer for the remaining shares in February.
Japanese auto makers are all looking for ways to give their suppliers a shot of adrenaline. Historically, they were joined by cross shareholdings in tight networks called keiretsu, an arrangement that allowed close cooperation on new-car development. But the companies also worry that this insular relationship ultimately stifled innovation.
Toyota Motor last year announced that it would tap Continental for some cutting-edge equipment, bypassing its main parts supplier, Denso Nissan’s self-driving technology relies on a camera from Michigan-based TRW and software from Israel’s MobilEye.
With the deal Nissan sheds one of the last vestiges of its keiretsu, which chief executive Carlos Ghosn, seeking to control costs, began breaking up upon joining the company in 1999. Nissan said it had looked at a range of options to inject cash into Calsonic Kansei before inviting bids.
The supplier was a rarity in that it actually grew closer to Nissan after Ghosn’s arrival. In 2005, the car maker increased its stake to the current 41% from 28% for Yen100 billion, making the parts supplier a subsidiary. The cash infusion was meant to enable Calsonic to bring in new customers, reducing its reliance on Nissan.
Nissan represents 85% of Calsonic Kansei’s business, up from 84% last year, said the parts company, which cited fluctuating exchange rates. Its next-largest customers are Isuzu Motors and Nissan partner Renault.
Under KKR, Calsonic Kansei will seek to achieve what it could not under Nissan: become a global supplier that can compete with behemoths like Continental and Robert Bosch. Automotive suppliers that excel at making ever-smaller and cheaper parts from plastic and sheet metal must now also fend off new competition from software giants like Apple and Samsung Electronics.
Calsonic Kansei said it would use some of the funds from the sale of its own shares to acquire companies that can broaden its parts offerings.
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This article was published by The Wall Street Journal