July 15, 2021: Japanese materials producer Showa Denko is to sell its lead-acid battery operations to investment fund Advantage Partners and financial services company Tokyo Century, it confirmed on July 8.
Calling the transaction a ‘company split’, Showa Denko said the company’s battery business would first be separated from its material production arm, then all shares would be transferred to a firm called Sustainable Battery Solutions, whose largest shareholder is Advantage Partners.
Advantage Partners said the business was expected to achieve profit growth and stable cash flows ‘by strengthening the automotive and industrial storage battery businesses, where steady demand is expected to continue’.
It said the transaction would be completed with a consortium of itself and Tokyo Century.
“Expansion of e-commerce, cloud services and next-generation telecommunications networks will also lead to increased energy storage demand from data centres and telecoms.
“Growth opportunities also like in the basic elements supporting clean energy, including an expansion of renewable energy markets and the launch of lead battery products optimized for environment friendly vehicles.”
According to Nikkei Asia, which broke the story before Showa Denko could announce it later the same day, Showa Denko Materials bought Italian and Thai manufacturers of lead batteries in 2017, looking to tap into a growing awareness of disaster-related risks after the earthquake and tsunami that devastated Japan in 2011.
“But with rising lead prices eating into profitability, and fewer synergies emerging from the acquisition than originally anticipated, Showa Denko began weighing a sale of the battery business,” it said.
Quoting research firm Fuji Keiai, Nikkei Asia said Denko’s global market share of lead-acid batteries in 2019 was 4% — giving it an eighth place ranking behind leader Clarios, with 16%, and G S Yuasa in second, with 8%.
“The likely goal of this deal is to turn the battery business around before selling it on to another manufacturer looking to expand,” said Nikkei Asia.
Showa Denko said the decision had been made to focus on the company’s chemical manufacturing, specifically ‘electronics, mobility, and life science that can lead to the future growth of the company group’.