Japonica
Partners rescued ailing Allegheny International ("Allegheny")
from bankruptcy with a $630 million entrepreneurial acquisition
of 12 international businesses. Japonica purchased multiple classes
of the company's claims from creditors and worked with management
to build a superior business plan. Such partnering efforts ultimately
succeeded in obtaining board approval for the acquisition, leading
to a "win-win" outcome for all constituents. Additionally, Japonica
assumed management's plan of reorganization, and retained numerous
executives and nearly all operating managers.
Allegheny, an underperforming
global large cap, was forced into bankruptcy. Dozens of potential
buyers had been contacted and walked away. When Japonica Partners
first approached Allegheny as a proactive white knight, the billion
dollar Fortune 500 company was a vestige of a large diversified
conglomerate. Principal remaining businesses consisted of a wide
range of global consumer products companies, utilizing a wide
range of brand names. Financial reports showed that virtually
all operating units were losing money and that sales were declining
fast.
Japonica assembled
a team of approximately 100 entrepreneurs, including former executives
of Borg Warner, General Electric, and Sunbeam, to address significant
aspects of the Allegheny situation. Numerous professionals, with
expertise in regulatory matters, accounting, taxation, law, and
environmental issues, also played an important role on the team.
Allegheny management facilitated Japonica's Value Gap research
efforts by providing workspace in their corporate offices and
access to relevant corporate records. After almost 15 months of
effort and over 30,000 work hours and 4,000 pages of analyses,
the team discovered significant "hidden value" in Allegheny, which
previously had been unnoticed.
To provide entrepreneurial
returns for its co-investors, Japonica used innovative pre-control
investment methods of purchasing debtors' claims through various
approaches. Japonica initiated a public tender offer for several
series of Allegheny's subordinated debt, and acquired enough claims
to potentially own over 50% of the equity under management's plan.
Thus, Japonica had substantial economic influence in the process
to maximize the value of its investment.
After a highly competitive
bankruptcy court proceeding, Japonica accomplished what many consider
to be one of the first proactive acquisitions of a bankrupt company.
In fact, Japonica's pioneering effort to acquire Allegheny's many
business units is used as a "best practice" case study at Harvard
Business School. Japonica's strategies and execution in acquiring
the diversified conglomerate businesses is cited as one of the
greatest reorganizations of all time. |
