TDK plan $1.9bn takeover of Germany’s Epcos reports Osaka Matsui Management
The Osaka based wealth management company, Osaka Matsui Management today announced that Japan’s TDK Corp is planning to purchase the German electronic parts maker Epcos AG for $1.9 billion in cash, seeking expansion overseas and a boost to industrial-use components.
TDK will initiate a friendly tender at €17.85 ($27.81) per piece for all Epcos shares, a 29 per cent premium at the close of Wednesday and €1.2 billion marking the most significant recorded takeover by a Japanese electronic components manufacturer.
The deal is expected to boost TDK’s market share of condensers and inductors, helping it cope with the falling prices eating into profits across the industry including rivals Murata Manufacturing Co and Kyocera Corp. TDK and Epcos said that there were little business and geographical overlap between them. TDK mainly supplies consumer electronics parts and has a strong foothold in Asia, whereas Epcos is solid in Europe and components for automotive and industrial use.
An increasing number of cash-rich Japanese companies are pursuing out overseas opportunities. According to data from Thomson Reuters, the outbound Japanese takeovers for 2008 reached $24 billion as of July, almost matching the haul for much of last year.
“We have never made a significant investment like this. The market conditions are challenging, and TDK’s fortunes are at stake, “ Michael Carter, Head of Global Equities at Osaka Matsui Management noted.
TDK shares closed down 1.5 per cent at 6,500 yen after Reuters, and other press reported an imminent deal, raising investor concerns about the massive financial strain. Epcos shares leapt almost 29 per cent.
Credit rating agency Moody’s said it was examining TDK for a possible downgrade given the acquisition’s large size, which is roughly equal to the cash balance of TDK. TDK said the deal would be financed via a bridge loan.
TDK, which makes tiny components used in cellular phones, computers and flat-panel televisions, said merging with Epcos would give it the scale to make development, procurement and sales more efficient.
“We believe it will be a positive move for TDK,” Osaka Matsui Management’s Michael Carter continued, adding that it would bolster TDK’s position in both China and Europe. “Epcos is a solid player in Europe and the automotive industry.”
Epcos is Europe’s largest manufacturer of passive electronic components that control electricity flow, supplying capacitors, inductors and acoustic wave surface parts for use in automobiles and consumer electronics.
Established in 1989 as a joint venture between Germany’s Siemens and Matsushita Electric Industrial Co, in the year ended September 2007 Epcos had sales of 1.4 billion euros.
According to Osaka Matsui Management, TDK’s annual sales combined with Epcos, would total some 1.1 trillion yen, making it Japan’s second-largest component maker after Kyocera, which logged sales of 1.3 trillion yen last business year.
TDK, which took over the hard drive head business of Alps Electric Co Ltd last year, has pursued acquisitions to gain economies of scale necessary to weather price drops and to give it a more significant presence overseas.
Osaka Matsui Management mentioned that TDK has been hit by a downturn in the world economy along with its competitors. TDK posted a 72 per cent drop in net group profit on Thursday for the three months ended June 30 and reduced its annual forecast to 55 billion yen by 15 per cent.
Originally published at https://www.reuters-asia.com on July 31, 2008.
