On August 28, The Carlyle Group announced it acquired 91% of Kito Corp., a Japanese maker of cranes and hoists, in a public-to-private deal worth $111.8 million.
The share swap and subsequent privatization will occur in November.
The Kito board voted unanimously to support the takeover, which was made possible by the signing of the Industrial Rehabilitation Law, which allows a cash-for-shares swap-the first of its kind in Japan. Japan’s Ministry of Economy, Trade and Industry sponsored the law in an effort to boost M&A activity on the island, and possibly entice the buyout sector, which has a boatload of equity overhang.
Sumitomo Mitsui Banking Corp. led the debt syndicate, while Carlyle and Kito management provided equity for the deal.
Founded in 1932, Kito manufactures hoists and cranes used in industrial settings, and designs and produces automated warehouses and sorters for material handling systems. The company has subsidiaries and joint ventures in Canada, China, Thailand and the Philippines, and in the U.S. under the name Harrington Hoists. In 2002, Kito’s revenue topped $170 million.
The Kito deal is the Washington-based buyout shop’s second deal in Japan this year. In January, the firm purchased Asahi Security, a subsidiary of supermarket group Daiei Inc., for approximately $100 million. Shinjiro Kito, the company’s president and son of the founder, has publicly stated Kito’s desire to strengthen its businesses in North America and China.
While China has proved a hard nut to crack for any LBO shop due in part to jingoistic cultural issues, no private equity shop is more in tune to American political machinations-and how to make the most of its political connections-than Carlyle, which could be a boon to Kito’s U.S. operations.
Given the rarity of U.S. firms doing deals and setting up shop in Japan, and Carlyle’s foothold in Asia coming before most private equity shops considered Asia as a viable buyout haven, the firm may soon be in a position of power in comparison to its peers, in large part due to an increasing familiarity with Japanese social and business customs that confound most westerners.
Carlyle’s two Japan-based deals this year, coupled with Ripplewood’s $2.2 billion leveraged buyout of Japan Telecom may be the harbinger of things to come- and morph Japan from uncharted territory to an LBO boomtown. .