Trading house Itochu has said it will spend ¥220 billion ($1.5 billion) to take full control of two divisions, including clothing company Descente, and buy back ¥150 billion worth of its own shares.
The deals are part of a trend among Japanese companies to end dual listings of parent and subsidiary companies in a bid to improve corporate governance and enhance operational efficiency.
Itochu, which owns 44.44% of Descente, said Monday it will invest ¥182.6 billion to buy the remaining stake through a public offering of ¥4,350 per share, a 16.6% premium to Friday’s closing price.
The company will also spend ¥37.6 billion to buy the 44.31% it does not own in chemical company CI Takiron through a public offering of ¥870 per share, a 9.7% premium to Friday’s closing price.
Itochu plans to launch the bid for Descente in early November, after the competition authorities in Japan and China have given their approval. The tender for CI Takiron will run from Tuesday until September 18.
“We want to make Descente the core of our textile business,” Tsuyoshi Hachimura, Itochu’s chief financial officer, told a news conference, stressing Descente’s growth potential as a sportswear brand in Japan and abroad.
The spending is part of Itochu’s record ¥1 trillion investment plan in growth sectors for the current fiscal year, announced in April.
The company also said it would conduct a ¥150 billion share buyback program from Tuesday through March 31, as announced in April. The program is part of its goal of achieving a 50% total shareholder return this year.
Net profit at Itochu, which is owned by U.S. investor Warren Buffett, fell 3.1 percent to ¥206.6 billion in the April-June quarter, due to lower profits at its energy and chemicals division and metals division. However, the company stuck to its full-year profit forecast of ¥880 billion.
