On 27 November, Japan’s Kyocera announced that it is seeking to purchase the 28% of common shares in capacitor manufacturer AVX that it does not already own. The offer of US$19.50 per share represents a 30% premium over the 26 November closing price of US$15.04.
The announcement comes soon after the news that Taiwanese electronic component manufacturer Yageo is to purchase the world’s other major tantalum capacitor manufacturer, Kemet. The acquisitions mean that a large part of the tantalum capacitor industry will no longer be under US control. That apart, the two deals are somewhat different in nature. While the purchase of Kemet took many by surprise and has been seen as a move by Yageo to broaden its product offering, the outright purchase of AVX by its largest shareholder has been on the table for a long time, although the latest decision may have been spurred by the Kemet sale.
AVX and Kyocera merged in 1990 in an all-stock deal between the two company founders. In 1995, Kyocera decided to allow AVX partial independence and allowed 25% of it to be listed on the NYSE, while retaining the other 25%. That was a highly unusual move for a Japanese company but it worked well while the founders still led their companies and AVX kept delivering healthy profits and cash. The Kyocera founder also appreciated that Japanese management of US companies can be problematic. He essentially left AVX to do what it did best.
Things have changed, however. The current senior management at Kyocera have been pursuing a more traditional “Japanese” approach to running the business. The process began when Kyocera took over from AVX the marketing and sales function for Kyocera products outside of Japan. Industry observers consider that this move was not a great success, neither was Kyocera’s taking responsibility for marketing AVX products in Japan. It could be argued that the main thing created was an expensive duplication of effort.
With Kyocera’s founder now taking a back seat and most of AVX’s senior executives no longer in their youth, it seems quite possible that the special relationship between the two parties has gone and imposition of a Japanese style of management on a US company will result in something of a culture clash (as may also happen at Kemet).
What happens next is largely in the hands of the shareholders other than Kyocera. The news pushed up AVX’s share price to a high of US$20.51 by close of business on 27 November, which is above the original offer. If Kyocera is serious in its intent to take full control of AVX, it will need to increase the offer to shareholders.
Roskill’s NEW report, Tantalum: Outlook to 2029, 15th Edition is due to be published in the coming months. Click here to download the brochure and sample pages for the report, or to access further information.