M&A

Japanese trading company Itochu acquires UK’s Fettle Bike Repair

Japanese trading company Itochu has acquired the British company Fettle Bike Repair, through its subsidiary Kwik-Fit and ultimately the holding company European Tyre Enterprises.

It’s a small scale deal – Fettle was only founded in 2019, is loss making on a £750,000 turnover, employing 24 people, but has been in an operational partnership with Kwik-Fit since March l2023, establishing a total of three joint centres: two in London and one in Bristol in South West England. Fettle will be accessing Kwik-Fit’s nationwide network.

Itochu see this deal as part of their commitment to sustainable development goals, as well as growth area, with the rise of e-bikes, and companies having fleets of e-cargo bikes and delivery bikes. Or as they put it “the realization of social systems that have a low environmental impact and the development of a sustainable society by meeting demand for the repair of diversified means of transportation and servicing of increasingly diverse means of transportation and building a network for after-sales services in the mobility market.”

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Sumitomo Corporation and Osaka Gas sell Sutton and East Surrey Water

Japanese trading company Sumitomo Corporation and Osaka Gas have sold their 50/50 ownership of the UK utility Sutton and East Surrey Water for £380m (including £291m in debts) to the Pennon Group plc, a UK based water utility company. Sumitomo Corp and Osaka Gas set up a joint venture for the ownership of Sutton and East Surrey Water in 2013. In October 2023, Ofwat named SES Water among the four worst performing water companies financially in the UK, calling for them to turn around their finances. According to the FT, Sumitomo and Osaka Gas did not want to put equity in the business, so decided to sell and paid a £7.8m dividend last year.

Sumitomo say it has sold off its share as part of its portfolio reshuffle under its Medium-Term Management Plan “SHIFT 2023” and is “executing strategic asset replacement”. It will continue to reinforce and develop its primary earning pillars by “leveraging its strengths utilizing management capital including operation know-how acquired from this UK water business.”

Pennon also owns South West Water, Bristol Water and Bournemouth Water. South West Water was fined £2.15m for illegal sewage dumping in April 2023. SES Water was fined £300,000 in October 2022.

Sekisui Jushi acquires German traffic engineering company WEMAS Absperrtechnik

Japanese transportation, safety and construction manufacturer Sekisui Jushi has acquired German traffic engineering company WEMAS Absperrtechnik.

The transaction supports the Sekisui Jushi Group Vision 2030 strategy, through which the company aims to enable the safety, comfort and security of people across the globe.

Sekisui Jushi was originally a subsidiary of Sekisui Chemical. In August 2023 Sekisui Chemical sold off part of its stake in Sekisui Jushi with the result that Sekisui Jushi is no longer an affiliate of Sekisui Chemical by the equity method. The intent is “to continue to collaborate with Sekisui Jushi Corporation as a good business partner going forward.”

Sekisui Jushi already has a holding company for Europe and Sekisui Jushi Strapping in the Netherlands, employing around 45 people. The acquisition of WEMAS will add 130 more employees.

Sumitomo Heavy Industries opens new European HQ in the Netherlands

Sumitomo Heavy Industries employs over 4,300 people across Europe in a variety of sectors including cryogenics, energy, gears, motors and injection moulding machines. It acquired Invertek in the UK in 2019, Lafert in Italy in 2018 and FW Energie in the Netherlands in 2017.

Up until now the subsidiaries had been directly managed by Japan headquarters but from January 2024 they will be managed by a new European headquarters, Sumitomo Heavy Industries Europe, based in the Netherlands. The regional headquarters is intended to provide sales, accounting, and procurement-related support, as well as strengthen governance.

Outsourcing Inc to undergo Bain backed MBO

According to the Nikkei, Japanese human resources service company Outsourcing aims to take its shares private through a management buyout with Bain Capital, which will likely exceed 200 billion yen ($1.3 billion). It seems that rapid expansion through M&A has made the group difficult to manage. Outsourcing is currently listed on the Tokyo Prime market, and it may be that the increasing demands of maintaining this status have become too onerous.* Several other listed Japanese companies have undergone MBOs recently, such as Benesse, Taisho Pharmaceuticals and Sidax.

The Japanese version of the Nikkei report says that Outsourcing had 230 consolidated subsidiaries as of September 2022. As the number of companies within the group increased, the cost of maintaining the company’s listing increased, including the time-consuming task of preparing consolidated financial statements. In 2021, inappropriate accounting was discovered at 17 group companies. Outsourcing intends to use Bain to proceed with post merger integration, including the consolidation and abolition of group companies and strengthening corporate governance.

Of the 110,000 employees, 58.8% are overseas. We estimate around 1,200 of those employees are in the UK, and 5,000 or more are in the EMEA region. It is hard to estimate accurately as so many employees are despatched employees rather than core administrative and management staff and each country treats the status of outsourced employees differently. Outsourcing has not updated its fact sheets or fact books in English for several years, which is perhaps a reflection of the complexity they now face. The website features rather a lot of photos of the founder, Doi Haruhiko with the late Queen Elizabeth II , due to Outsourcing’s sponsorship of the Royal Windsor polo match.

The board of directors used to reflect two of Outsourcing’s biggest acquisitions in Europe, CPL Resources and Otto Holdings. Irish born Anne Heraty from CPL still seems to be on the board but Franciscus van Gool from Otto seems to have resigned.

*UPDATE

On 20th December 2023, the Tokyo Stock Exchange requested Outsourcing Inc to submit an Improvement Status Report with regard to the status of implementation and operation of the improvement measures, having found that multiple companies in the group made inappropriate applications for employment adjustment subsidies (the Japanese equivalent of the furlough scheme used in various countries during the pandemic) at the same time.

Japan’s NTT Data acquires UK Sapphire Systems

NTT DATA Business Solutions AG, the German subsidiary of NTT DATA has acquired Sapphire, a UK-headquartered provider of digital operations software and services to primarily mid-market customers in the US and UK markets. This will strengthen NTT Data’s capabilities in SAP cloud and digital related services.

Sapphire has over 400 employees in 8 countries, with 168 in the UK. It also has offices in the USA, Argentina, Mexico, Lebanon and India.

This is the latest in a long series of NTT Data acquisitions around the world, including Everis in Spain (2014), MagenTys (UK, 2018), itelligence (Germany, 2013) and Dell’s services business (2016). The NTT group has nearly 37,000 employees across Europe, Middle East and Africa, making it the fourth largest Japanese employer in the region.

Daiwa Securities group acquires Irish M&A advisory IBI Corporate Finance

Daiwa Securities has added another acquisition to its European network of corporate advisory firms by acquiring IBI Corporate Finance for over 10 million euros. This will add 28 employees to the 300 or so based in Europe. More than half of the European employees are based in London and Manchester, building on the acquisition of Close Brothers in 2009. Recent acquisitions have been elsewhere in Europe such as Montalban in Spain in 2019.

IBI provides M&A advice across sectors including finance, health care and infrastructure, centering on on small- to mid-cap M&As worth less than $500 million.

Fuyo General Lease to set up UK renewable energy investment subsidiary

Fuyo General Lease is setting up a subsidiary in the UK from April 2024 to invest in renewable energy, particularly offshore wind. It entered the European renewable energy business in June 2022, and in about a year and a half, the total amount of investment and loans exceeded 50 billion yen in Japanese yen. The company will also invest approximately 30 million euros (approximately 4.7 billion yen) in a fund managed by Danish investment company Copenhagen Infrastructure Partners (CIP).

Fuyo General Lease already has subsidiaries in the UK and Ireland focused on aircraft leasing and acquired British company Aircraft Leasing and Management in 2014. Other Japanese leasing companies such as Orix have already been expanding in Europe – Orix acquired Spanish renewables company Elawan Energy in 2020.

Nisshinbo divests TMD Friction

Nisshinbo has sold its 2011 acquisition, automotive brake component manufacturer TMD Friction to AEQUITA, a private equity firm based in Munich, Germany. TMD Friction is headquartered in Luxembourg, with European production in Germany, Spain, UK, Romania and France. It had already restructured its UK operations, shutting down production in Kilmarnock in 2019 and more recently investing in new machinery for its Hartlepool plant. It employs around 2,237 people in the European region, with 670 in the UK, 577 in Romania, 437 in Germany, 300 in Luxembourg and 150 in France, and a further 2,000 in the USA, Mexico, Brazil, China and Japan. The transaction is expected to be completed in Q4 of 2023, subject to approval by the relevant authorities.

Sakata acquires Dutch company Sana Seeds

Sakata Vegetables Europe, headquartered in France, has acquired the Dutch cucumber company Sana Seeds. Sakata has acquired several companies across Europe over the past few decades – Samuel Yates in the UK in 1996, a seed company in South Africa in 1999, a flower company in Denmark in 2003, a gerbera company in the Netherlands in 2008 and a cucumber company in Jordan in 2017. It also has operations in Spain, employing over 200 people in the region in total.

Category: M&A