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Toh Han Shih

Alliance will take Japanese firm private after US$350m management buyout

Citic Provident Management, the private equity subsidiary of Hong Kong-listed Citic Capital Markets Holdings, and two partners will fork out  US$350 million in a management buyout of Japanese food and beverage firm Pokka Corp.

Pokka,  listed on the Tokyo Stock Exchange with a market capitalisation of 21.6 billion yen ($1.53 billion), will be taken private, said a source close to the deal, adding that Pokka's board agreed to the buyout yesterday.

'If you want to build a business and invest heavily in the company, sometimes it's better to take it private. The market likes short-term profit but when the company wants long-term growth, it may have to sacrifice short-term  earnings,' said the source.

Last year, Pokka's turnover grew 0.2 per cent to US$916.8 million while earnings before interest, depreciation and amortisation  fell 11.3 per cent to US$40.8 million, according to a Citic Provident press release  announcing the buyout.

'Citic Provident intends to play an active role in helping Pokka develop its brand and operations in China,' the company said.

The three partners in the deal are Pokka's management, Citic Provident and Advantage Partners, a Japanese private equity firm, said the source. 'Citic Provident can greatly accelerate Pokka's China operations. When Citic Provident sells its stake in five to 10 years, hopefully Pokka's China business will have grown a lot. China is one of the fastest-growing food and beverage markets,' said the source.

Citic Provident  would help Pokka build its  China management team and roll out its distribution network, said the source. 'Several Japanese food and beverage  firms such as Kirin and Suntory are making a big push into the mainland canned coffee market, and Pokka would like to be part of that.'

China  accounts for a small part of Pokka's business. Last year, Asia excluding Japan,  contributed only 8.7 per cent of  revenue, according to Pokka's  annual report.  The firm  has a factory in Jiangsu province.

Citic Provident  invests in  foreign firms to expand their businesses in China.  In December,  it bought a 45 per cent stake in Shinwa International Holdings, the largest Japanese maker of car audio components with annual revenue  exceeding US$500 million.

As for Advantage,  the Japanese firm closed a third private equity fund of 46.5 billion yen  in July.



Citic unit, partners to acquire Pokka