Texas Pacific Group has ended its discussions to purchase a majority stake in JVC after failing to agree terms with the ailing consumer electronics group, according to people familiar with the situation.
The collapse of the deal, which was valued at about $550m, ends what would have been the biggest private equity takeover of a Japanese consumer electronics group.
It also highlights the continued resistance of Japanese companies to the hands-on management style adopted by many buy-out firms.
“It looks like Japanese management has managed to repel a company of TPG’s calibre. This sends a signal to others in Japan that it is possible to scupper deals and keep foreigners out,” pointed out a person familiar with the situation.
It is understood that Matsushita Electric, JVC’s parent, is now back in talks with Kenwood, the audio equipment maker, over acquiring its 52 per cent stake in JVC.
Kenwood shares on Monday rose as much as 10 per cent before closing up 1.5 per cent at Y205.
Shares in JVC, known formally as Victor Co of Japan, closed down 10 per cent at Y445, while Matsushita’s shares ended up 1.4 per cent at Y2,535.
The foreign investment banking community was closely watching the outcome of the talks, as it had predicted it could open the gates to further buy-outs of large Japanese companies. Talks between JVC and TPG broke down over price and the terms of the consumer electronic company’s restructuring steps.
The US private equity group was keen to send in at least a dozen executives to JVC to help it turn round the business.
In addition, it was calling for JVC to trim its board of directors to 11 members, from 17, according to people familiar with the situation.
To date, foreign private equity firms have struggled to make inroads in Japan, with dealmakers such as Carlyle Group establishing a footprint after adopting a local, consensual approach.
The last big buy-out involving a foreign private equity firm was nearly two years ago, according to Dealogic figures, when Goldman Sachs paid $1.35bn for a majority stake in Fujita, an ailing construction company.
“Perhaps the most ideal scenario for JVC is to remain independent, but in today’s competitive environment it is not possible,” said Tatsuya Mizuno, analyst at Fitch Ratings.
“Kenwood and JVC do not have overlapping businesses, but it is also difficult to see a key growth area that they could exploit together.”
Although TPG won exclusive rights with Matsushita to negotiate terms over buying the JVC stake, discussions dragged on past the March 31 deadline.
Matsushita, Kenwood and TPG declined to comment on Monday.