Buyout of a non-core business subsidiary of a major company

Situation

• In 2007, Oriental Diamond (ODI) became a subsidiary of Nissen Holdings Co., Ltd. (Nissen). After Nissen became a member of the 7&i Group in 2016, they considered selling ODI, which was a non-core business, as part of a business refocusing effort.
• In ODI, the loose diamond business, which was its main business, had shrank year by year. The company’s EBITDA became negative, pushing it into a state of significant insolvency.
• Although the ODI’s stock value was low, Gordon Brothers Japan (GBJ) focused on the inventories that they held. By assessing the value of the inventories, it was determined that no additional investment would be required for three years in the cash flow based on the business plan after the acquisition. It was judged that it was possible to improve profits sufficiently during the period.

Solution

• Structure                     :  All shares held by Nissen and transfer of loan receivables from Nissen to ODI
• Business alliance       :  Although GBJ had a wealth of knowledge about the products (jewelry) handled by ODI, GBJ support for further growth of ODI (product provision and sales channel expansion (overseas expansion, etc.), inventory consulting, ABL. etc), sufficient consideration was required.
• Investment strategy  :

1. Continued holding as a strategic subsidiary (no investment deadline, target IRR, etc.)
2. Resale of equity through a capital and business alliance with a business company

Results

• Invested by removing business disadvantages that were affected by a third-party factor (in this case, the performance of the parent company was sluggish).
• The target company planned to further improve its corporate value by utilizing our knowledge and know-how through a business alliance with us.