The owners of Kobelco & Materials Copper Tube (KMCT), a Tokyo, Japan-based copper tube production joint venture, are in late-stage talks with a potential buyer, three sources familiar with the situation said.
Mizuho Securities was retained as sell-side advisor, according to two of the sources.
Japanese private equity firm Japan Industrial Partners (JIP) has been in one-on-one talks with the owners and is looking to seal the deal in the coming weeks, they noted.
Kobe Steel, the Kobe/Tokyo-based steel manufacturer, owns a 55% stake in KMCT, and the rest is owned by Mitsubishi Material, the Tokyo-based manufacturer of non-ferrous metals, according to the company’s website.
The sale is led by Kobe Steel, the first source said.
KMCT generates annual EBITDA of about JPY 2bn, and the potential multiple could be slightly below 10 times EBITDA, reflecting other deals happening in the industry, the first source noted.
JIP is looking to consolidate KMCT with Furukawa Electric’s copper tube business, the two sources noted.
Therefore, the deal should be reviewed by the anti-trust regulator, the second source added.
This news service reported March 2019 that Furukawa Electric was divesting its copper tube business and was in late stage talks with JIP.
In the domestic copper tube industry, UACJ, a Tokyo-based casting and forged products manufacturer, is the largest player followed by Kobe Steel and Furukawa Electric, according to the previous Mergermarket report.
The potential consolidation was an anticipated scenario for the final bidder of Furukawa’s copper tube business, as the industry has been plagued by overcapacity due to the matured domestic market and it will need to eliminate production capacity, according to the two sources.
UACJ announced June 2019 the sale of Aichi-based copper and titanium tubes manufacturer UACJ Copper Tube Corporation to Japanese private equity firm Aspirant Group and Daiwa PI Partners.
KMCT was formed by Kobe Steel and Mitsubishi Materials to consolidate their copper tube businesses in Japan and Southeast Asia in April 2004, according to Kobe Steel’s press release.
It has production plants in Hatano-Kanawaga in Japan, Thailand, and Malaysia, according to KMCT’s website. The company’s annual production capacity is 60,000 tons a year in Japan, and 40,000 tons a year overseas.
Furukawa Electric’s copper tube production plant is located in Amagasaki-Hyogo, according to Furukawa’s website.
Kobe Steel and JIP did not return a call for comment by the time of publication.
Mizuho Securities, KMCT, Furukawa Electric declined to comment.
A spokesperson at Mitsubishi Material said he was not aware of the sale process, and the company intends to work with KMCT to increase the value of the company.