[News+1] ALSOK and Carlyle Acquire Nippon Dry-Chemical: A Privatization Partnership Between an Operating Company and a Fund with a 51-49 Split

A mid-career lawyer in Tokyo uses generative AI to provide background and regulatory commentary on daily corporate management news. The model used is Claude's Opus.

TOB Completed, Heading Toward Delisting

Nippon Dry-Chemical (Tokyo Stock Exchange Standard, Securities Code 1909), a fire extinguishing equipment company, announced on June 30 that the takeover bid (TOB) by ALSOK and the US investment fund The Carlyle Group has been completed. According to reports by the Nikkei, the company is scheduled to be delisted from the Tokyo Stock Exchange Standard Market. The purchase price was 3,730 yen per share. There were approximately 14.16 million shares tendered, exceeding the minimum threshold of approximately 13.46 million shares. After the purchase is completed, the effective equity ratio will be 51 percent for ALSOK and 49 percent for Carlyle. The company stated that it will deepen cooperation with ALSOK in the disaster prevention field, while Carlyle will support M&A strategies and other areas. Meanwhile, the US investment firm Neuberger Berman issued a statement requesting a re-evaluation, claiming the purchase price was too low, and Nippon Dry-Chemical's stock price temporarily traded above the TOB price of 3,730 yen.

An Operating Company and a Fund Partnering at 51-49

What is striking about this design is that ALSOK, an operating company, and the PE (private equity) fund Carlyle have partnered, with ALSOK holding a majority of 51 percent. In typical MBOs or privatizations, the fund often takes the lead and holds the majority, but here, the roles are divided such that ALSOK, which is aiming for business synergies in disaster prevention, holds the lead, while Carlyle complements this with capital and M&A support. This is a collaborative design similar to the one I covered recently regarding Satudora, where the founding family and a fund partnered. It can be called an intermediate form that is neither a pure fund acquisition nor a pure operating company acquisition. For ALSOK, this is a strategic acquisition to expand its disaster prevention business by incorporating the adjacent field of fire extinguishing equipment, and for Carlyle, it is an investment project to increase corporate value over several years by providing capital and M&A expertise. Even when buying the same company, the picture both parties are looking at is slightly different. One could read the 51-49 ratio as a reflection of that difference.

Objections to Price, Yet Still Completed

Another point of interest is the price. Neuberger Berman requested a re-evaluation, arguing it was "too cheap," and the stock price temporarily exceeded the TOB price of 3,730 yen. A stock price exceeding the TOB price is evidence that the market believes it could be sold for more or that a counter-proposal might emerge. Nevertheless, the TOB was ultimately completed with tenders exceeding the minimum threshold. Under the TOB (Financial Instruments and Exchange Act27Article2), shareholders dissatisfied with the price have the freedom not to tender. However, if the minimum threshold is met and the bid is completed, shareholders who did not tender are typically squeezed out later (Companies Act Companies Act179Article・180Article).

Minority Shareholder Choices and Price Fairness

Shareholders who tendered when the stock price exceeded the TOB price versus those who waited and saw. If the bid is completed and delisting is decided, it is highly likely that shareholders who did not tender will ultimately be bought out at the same price. Institutional investors like Neuberger Berman voicing objections to the price can be read as a move to represent the interests of minority shareholders. Even in a friendly TOB, the question of whether the price is fair is always raised. Especially in acquisitions led by operating companies, the issue of how much of the value created by synergies is captured by the buyer versus the seller also persists.

As a Restructuring of "Disaster Prevention x Capital"

ALSOK is in security, and Nippon Dry-Chemical is in fire extinguishing equipment. The composition is one where Carlyle's capital and M&A know-how are applied to a business restructuring under the umbrella of disaster prevention. The goal is likely to remove the shackles of being a listed company and reorganize the business dynamically. This form of partnership between an operating company and a PE firm is increasing in recent Japanese M&A. How to reconcile the business logic of synergy with the discipline brought by a fund within a privatized company is the key. I want to pay attention to how the integration proceeds after the acquisition, rather than the acquisition itself.

Related Article:The Hurdle of Asset Valuation Shown by the Kakaku.com Battle—TOBPrice Exceeding Stock Price and the Special Committee's Judgment

Related Article:SatudoraHD'sMBOReflecting the Collaboration Between the Founding Family and a Fund—33.4Percent Retention Privatization Design

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