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CASE STUDY

Major Transaction

Capital and business alliance negotiation between the major domestic clothing company (the "Company E") and the major Chinese spinning company (the "Company F")

Our Role

Financial Advisor to the Company E from 2009 to 2010

Transaction Summary

The task was accomplished by arranging a private placement of the Company E shares, valued at JPY4billion with 41% of the voting rights, which was subscribed by the Company F. This was the first instance of a company listed on the First Section of the Tokyo Stock Exchange to receive Chinese capital investment in a significant proportion.

Transaction Features

1.   Equity Investment by Chinese Company

It was an unprecedented transaction by which the company with over 100 years of proud history accepting the Chinese capital in such a major scale. The project encompassed from identifying and evaluating a potential investor, assessments of probable responses of customers, suppliers, dealing banks, employees and shareholders, as well as presentations to supervising governmental offices of the Japanese and the Chinese governments requiring well considered judgments and skillful management of processes.

2.   The Company under Revitalization Process

The Company E suffered consecutive years of losses, and it was undergoing corporate restructuring. Along with this transaction, the company was in process of divesting a profitable subsidiary as a part of financial enhancement. The critical factor for this project to obtain a fresh capital was dependent on the credibility of the business plan after the divesture of subsidiary.

3.   The Private Placement of Substantial Proportion at Preferential Condition

The transaction was defined as a private placement of substantial proportion by the listing rules of the Tokyo Stock Exchange due to equity dilution of over 25%, and classified as a placement with the preferential condition, according to the policy of the Japan Securities Dealers' Association since the shares were issued at the favorable price, and therefore, an approval by the shareholders meeting was required.

4.   Stance of the Largest Shareholder

The largest shareholder with approximately 25% of voting rights of the Company E had declared non-confidence for the incumbent management. In order to obtain the approval at the shareholders meeting, therefore, producing the business plan with credible growth strategy was demanded, which was attractive both to the largest shareholder and other shareholders, and the plan should be fully disseminated through IR and PR.

In this transaction, we have performed the central role encompassing from the start to the closing, including identifying and negotiating with the Company F as the investor, development of the business plan and forecast model of the future cash-flow, structuring the investment scheme, managing due-diligence, and coordination with the largest shareholder.

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