Private equity firm Bain Capital has entered a $445 million deal to buy Japan's D&M Holdings, maker of Denon audio equipment, from RHJ International and other shareholders.
Bain was the winner in an auction for RHJ InternationalÆs 49% stake in D&M Holdings at a price of Ñ510 ($4.75) per share, or a total of Ñ23.1 billion. The price represents a premium of 8.5% over the companyÆs closing price on June 19, 37% over the six-month average price and 69% over the closing share price on January 23 û the day before media speculation about a potential takeover of D&M was reported.
RHJ is being represented by Morgan Stanley. Others bidders in the auction were said to have been Japan-based private equity fund Advantage Partners and Merrill LynchÆs private equity arm.
Bain, which is being advised by Goldman Sachs and Lehman Brothers, will also offer to buy the remaining 51% shares in D&M and, if successful, intends to delist D&M from the Tokyo Stock Exchange where it is currently traded. BainÆs offer is subject to a minimum acceptance level of 80%. D&M said the acceptance threshold could drop to 75% if certain conditions related to the acquisition are met.
RHJ is a holding company to which private equity funds associated with Ripplewood Holdings transferred ownership in seven Japanese investments, including D&M, in 2004. RHJ International went public through an initial public offering on Euronext Brussels in March 2005. It closed at Ç7.15 ($11.17) a share on Friday after falling 4.47% on the day.
RHJ realised Ñ32 billion from the sale of its interest in D&M and will book capital gains of Ñ15.8 billion.
Ripplewood acquired D&M Holdings, a manufacturer of audio-visual systems and components, and digital entertainment home networking products, which it markets under various brand names including Denon and Marantz, earlier this decade. Since RHJ acquired the stake in 2004, it has created value in D&M through a series of acquisitions and divestitures.
In June 2005, D&M Holdings acquired Boston Acoustics, a manufacturer of high-performance audio systems, gaining a foothold in the audio automotive system business. In November 2006 it added the Philips Sound Solutions business owned by Royal Philips Electronics to its portfolio. In August 2007 it bought Calrec Audio, a designer and manufacturer of audio products and live-to-air consoles for the broadcast market, and in April 2008 it bought Allen & Heath, a designer and manufacturer of audio mixing consoles for professional sound engineers, live sound installations and disc jockeys. Both Calrec and Allen & Heath were UK-based.
The current deal follows soon after two other multi-billion dollar sponsor-to-sponsor deals in Japan. In October 2007 EuropeÆs largest buyout fund Permira won an auction for Olympus CapitalÆs stake in Arysta LifeScience for $2.2 billion. And more recently, in February this year, Advantage Partners acquired a controlling interest in Tokyo Star Bank (TSB) from LoneStar at a firm value of $2.4 billion.
Private equity firms have enhanced their focus on Japan as the local banking system is flush with funds and able to provide the leverage needed to achieve return targets. And with the credit crunch in some subprime-affected markets showing no signs of easing, it seems Japan could continue to witness increased activity.