Key assets will be acquired by Key Safety Systems.
Japanese automotive parts supplier and airbag maker Takata has officially filed for bankruptcy protection in Japan and the United States. During a special news conference in Tokyo, CEO Shigehisa Takada bowed in apology for the fall from grace.
"If things are left as is, we are aware of risks that we may not able to raise fund and to continue stable supply of products," he said in front of media representatives. "In light of the management environment we face, the state of negotiations with the sponsor candidate and carmakers, and the external expert committee's opinion, we have decided today to file for bankruptcy protection."
Takada explained the company had no other choice but to sell its assets for cash, confirming U.S. supplier Key Safety Systems is buying “substantially all” of Takata’s global assets and operations for $1.59 billion.
"We spent much time on negotiations, it was extremely difficult to reach an agreement with more than 10 carmakers worldwide and a sponsor candidate company," Takada commented.
Currently, Takata is still in talks with automakers and the total amount of liabilities is still unclear, according to the company’s attorney Nobuaki Kobayashi. However, industry experts have revealed potential liabilities could be as high as $10 billion, covering penalties, ongoing recalls, and settlements. Early next year, Takata is expected to sign the final settlement with the U.S. Justice Department and to pay a penalty of up to $1 billion.
As far as the deal between Takata and Key Safety Systems is concerned, the U.S. company promises to retain all Takata employees and maintain operations in Japan. Also, the firm will continue to support Takata customers, suppliers, and employees and "embrace and honor Takata’s Japanese heritage."
"KSS is the ideal sponsor as we address the costs related to airbag inflator recalls, and an optimal partner to the company’s customers, suppliers and employees," Takada declared in an official statement.
Check out the press release section below for more details about the Takata - KSS deal.
Source: Takata and KSS via Automotive News
Sterling Heights, MI USA June 26, 2017 – Key Safety Systems (“KSS”), a global leader in mobility safety headquartered in Sterling Heights, Michigan, USA, and Takata Corporation (“Takata”), a leading global supplier of automotive safety systems such as seat belts, airbags and child seats, announced today that they have reached an agreement in principle to sponsor a restructuring plan for the purchase of substantially all of Takata’s global assets and operations by KSS for an aggregate purchase price of $1.588 Billion (approximately ¥175 billion) , subject to certain adjustments at closing.
Under the agreement, KSS will acquire substantially all of Takata’s assets, except for certain assets and operations that relate to Takata’s manufacturing and sale of phase-stabilized ammonium nitrate (PSAN) airbag inflators (collectively, the “PSAN Assets”). It is expected that Takata’s PSAN-related operations will be run by reorganized Takata following the transaction closing and eventually will be wound down.
By combining substantially all of Takata with KSS, the transaction would form a leading global safety supplier with approximately 60,000 employees in 23 countries focused on serving customers and providing superior products and innovation in the rapidly evolving auto safety industry.
Jason Luo, President & CEO of KSS, said: “Takata has deep management talent, a dedicated work force and a long history of exceptional customer service. Although Takata has been impacted by the global airbag recall, the underlying strength of its skilled employee base, geographic reach, and exceptional steering wheels, seat belts and other safety products have not diminished. We look forward to finalizing definitive agreements with Takata in the coming weeks, completing the transaction and serving both our new and long-standing customers while investing in the next phase of growth for the new KSS.”
Shigehisa Takada, Chairman & CEO of Takata, said: “KSS is the ideal sponsor as we address the costs related to airbag inflator recalls, and an optimal partner to the company’s customers, suppliers and employees. The combined business would be well positioned for long-term success in the global automotive industry. Throughout this process, our top priorities have been providing a steady supply of products to our valued customers, including replacement parts for recalls, and a stable home for our exceptional employees. This agreement would allow that to continue.”
The proposed structure for the potential transaction is intended to minimize transaction risk and supply chain disruption concerns for Takata’s OEM customers. The companies anticipate a quick and seamless integration, utilizing the combined strengths of their respective management teams to implement a smooth transition.
KSS will continue to support Takata’s customers, suppliers and employees and embrace and honor Takata’s Japanese heritage:
- KSS plans to retain substantially all of Takata’s employees across the world on comparable employment terms as currently provided.
- KSS has held in-depth discussions with Takata’s major OEM customers and has jointly developed a transaction structure and operating plan to facilitate ongoing supply of Takata parts. This should provide continuity of supply to Takata’s customers and confidence to Takata’s employees, suppliers and other key stakeholders.
- KSS plans to continue to support and utilize Takata’s presence in Japan, and does not intend to shut down any of Takata’s manufacturing facilities there. Furthermore, KSS intends to establish an Asia regional headquarters in Tokyo, which should create new jobs in Japan, and plans to retain Takata’s existing non-PSAN supplier contracts to maintain an uninterrupted supply chain. KSS also intends to invest in many of Takata’s other worldwide manufacturing facilities and technology and R&D centers.
KSS has substantially completed its due diligence, and Takata and KSS are working toward finalizing a definitive agreement in the coming weeks. Takata has determined that it is in the best interests of the company and its stakeholders to address the recall-related issues in conjunction with the proposed sale. Accordingly, with KSS as plan sponsor, proceedings have commenced under the Civil Rehabilitation Act in Japan and in the United States of America under Chapter 11 of its bankruptcy code. Subject to successful completion of the in court proceedings and other closing conditions, including certain regulatory approvals, KSS expects transaction closure can occur in the first quarter of 2018.
Further information regarding the proceedings can be found at www.takata.com.
Skadden, Arps, Slate, Meagher & Flom LLP is serving as legal counsel, KPMG is serving as financial advisor, Jefferies LLC is acting as lead financial advisor while UBS Investment Bank also provides financial advice to KSS.
Nagashima Ohno & Tsunematsu and Weil, Gotshal & Manges LLP are serving as legal counsel to Takata. PricewaterhouseCoopers is serving as financial advisor, and Lazard is serving as investment banker to Takata.