Japanese camera and endoscope maker Olympus has agreed to sell its business process outsourcing unit to buyout firm Longreach, the latest example of a sprawling Japanese conglomerate selling a non-core business.
Longreach said in a statement on Monday that it expects its purchase of Nippon Outsourcing Corp. (NOC) to close by October 31.
Financial details were not disclosed but a person familiar with the matter told FinanceAsia that the enterprise value of the deal was below $100 million.
Such carve-outs are slowly gaining traction in Japan as the government steps up pressure on companies to focus more on pleasing shareholders. In June last year, the Japanese Corporate Governance Code took effect, encouraging firms to employ outside directors who regard non-core operations more dispassionately.
Foreign buyers have also been helped by the growing recognition among Japan’s executives that they need to move overseas for growth. This strategy is bringing them up against formidable and larger competitors, which is in turn pushing them to be leaner and more focused.
Olympus is also recovering its standing among investors after a $1.7 billion accounting scandal in 2011, when former chief executive Michael Woodford uncovered payments made to cover up investment losses.
Olympus’ sale of NOC may help the company appear more attractive to potential clients in Japan as an independent entity. NOC is profitable and sales have been edging higher, as has Ebitda, from a range of services including administrative support (HR, accounting, finance and payroll) to back-office support (CRM and logistics).
Longreach plans to partner with NOC’s management team and employees, bringing capital, management resources and networks in Japan and internationally to support NOC’s future profitable growth.
The North-Asia buyout firm, led by Mark Chiba, has now fully deployed the capital from its second fund and is about to launch a fresh round of capital raising. Longreach has targeted ¥65 billion to ¥70 billion for its third fund, according to market sources. Chiba declined to comment.
Part of its pitch is that it is one of the few private equity firms in Japan that has managed to source assets from blue chip Japanese firms.
In June, Longreach agreed to buy Wendy’s Japan and combine it with the hamburger and pasta fast food chain First Kitchen, a wholly-owned subsidiary of beverages conglomerate Suntory Holdings. The deal marked the first time Suntory has sold to a private equity-controlled company.
In August 2013, Longreach said it was buying micro drilling-machine maker Hitachi Via Mechanics and in 2010 the buyout firm acquired Sanyo Electric Logistics.
