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Fujitsu General second round bids for air conditioner making unit due in March

Fujitsu  [TYO:6702] is expected to collect second-round bids for the sale of its air-conditioner making unit Fujitsu General [TYO:6755] in March, sources familiar with the situation said.

Around five bidders, including both strategics and private equity firms, have been shortlisted following the first-round bids, two of the sources said.

Bain Capital is among those, while KKR is also believed to be in the running, three sources noted. 

Based on today’s (24 February) closing price of JPY 3,770, Fujitsu General is trading at an EV/EBITDA multiple of around 16.4x for the year ending March 2023, according to Fidessa consensus data compiled by Factset

The stock is up 21.22% year to date valuing the firm at JPY 412.2bn (USD 3bn) in total. 

Meanwhile, the first source believes Fujitsu General — although it is far behind leading air-con maker Daikin Industries [TYO: 6367] — can still grow globally, and global private equity firms, such as Bain Capital and KKR, have the resources and expertise to help beef up Fujitsu General’s enterprise value by reducing its global sales costs and reinforcing its sales/marketing structures. Then it can attract global strategic peers when private equity firms seek to exit, the first source added.

Mergermarket reported on 27 January 2023 that Fujitsu [TYO:6702], the Tokyo-based IT conglomerate, has received first-round bids from around 10 bidders for the sale of its 44.05% stake in Fujitsu General by the 20 January due date.

The deal structure involves the final winner of the auction making a tender offer for the shares held by minorities, prior to acquiring Fujitsu’s stake, as previously reported by Mergermarket .

The report noted that Bain Capital and MBK Partners were among those that have been looking at Fujitsu General.

Fujitsu General’s sector peers include Daikin Industries [TYO:6367], Mitsubishi Electric [TYO:6503], Johnson Controls International [NYSE:JCI], Lennox International [NYSE:LII], GREE [SHA:000651], Midea Group [SHE:000333] and Carrier Global [NYSE:CARR], according to the previous Mergermarket report.

Fujitsu was in talks with Germany-based industrials giant Robert Bosch, which was advised by Rothschild, according to a Mergermarket report in October 2022. The two parties did not reach an agreement, according to the 27 January report. 

UBS is acting as a sell-side advisor to Fujitsu, while Fujitsu General is being advised by Lazard, as reported by this news service.

For the nine months ended December 2022, Fujitsu General posted sales of JPY 256.7bn (USD 1.9bn), up 29.6% from the same period the previous year, while operating profits declined 28.8% to JPY 3.6bn, according to its latest financial statement.

The company is projecting sales to increase 37.3% to JPY 390bn for FY22 as a whole (ends in March 2023) and for operating profits to improve by 113.2% year-on-year to JPY 18bn. 

According to Fujitsu General’s 2022 integrated report, Fujitsu owned 44.05% of the company as of the end of September 2022, followed by The Master Trust Bank of Japan (Trust Account) with 7.59%, JPMorgan Chase Bank 385635 with 4.05%, JPMorgan Chase Bank 380072 with 3.47%.

Fujitsu, Bain Capital and KKR declined to comment. Fujitsu General did not return requests for comment.