Takata's New Chinese Owner Emerges as Big Auto-Safety Player

  • Ningbo Joyson wins big with Takata deal, avoiding recall costs
  • Wang has built auto parts empire on decade-long takeover run

Takata Bankrupt With $10B in Liabilities

Wang Jianfeng has been on an epic acquisition tear over the past decade, assembling a formidable auto parts empire in China with $4 billion in revenue.

Now, the 46-year-old Wang, founder and chairman of Ningbo Joyson Electronic Corp., is about to pull off his biggest deal yet: a $1.59 billion takeover of Takata Corp., the troubled air-bag maker that filed for bankruptcy protection on Monday and is in the midst of the largest auto recall in history.

Ningbo Joyson is acquiring Takata’s assets through its wholly owned U.S. air-bag maker Key Safety Systems Inc, which it acquired last year for $920 million. The deal is structured to shield Key Safety from shouldering the cost of Takata’s projected 100-million unit recall of faulty air-bag inflators linked to at least 17 deaths. The inflator business will stay with Takata as will the financial responsibility for the recall, which will cost an estimated 1 trillion yen ($9 billion), according to Takaki Nakanishi, an analyst at Jefferies Group LLC.

The Takata acquisition could make Wang the owner of the world’s second-biggest safety parts supplier, trailing only Sweden’s Autoliv Inc. “Takata is a good company with strong factories and technologies, but it has made mistakes,” Wang told Bloomberg in April in Shanghai. “There’s potential for us to become one of the top two players in auto safety.”

Wang studied art in college (he’s an amateur landscape photographer) and later earned an executive MBA degree at Peking University. He worked briefly at a local export and import company in early 1990s in Ningbo City on China’s east coast before running a family-owned partsmaker for five years and doing a stint with TRW Automotive Inc.’s China operation.

The Chinese executive founded Ningbo Joyson in 2004 to supply parts including control, air-intake and windscreen-washer systems, and counts Volkswagen AG, Ford Motor Co. and General Motors Co. among its customers.

Rust Belt

Wang bought the shell of a loss-making state-owned textile company in China’s rust-belt northeast in 2011 and went public, injecting its auto parts business into the listed company. Wang’s family owns the NB Joyson Invest Holding Co., the largest shareholder of Shanghai-traded Ningbo Joyson.

This decade Wang has spent 11 billion yuan ($1.6 billion), acquiring companies such as Preh GmbH, IMA Automation Amberg GmbH and Quin GmbH in Germany, and Evana Automation in the U.S. Along with announcing the acquisition of Key Safety in February 2016, Joyson also took over the automotive division of Germany’s TechniSat Digital GmbH to develop car connectivity, infotainment and navigation systems.

Under Wang, the revenue of Preh GmbH, a German supplier of products including electronic control units, has more than tripled to 1.2 billion euros ($1.3 billion) last year from 2010. The company is hiring more than 100 employees annually in Germany and has built a unit with 800 employees in China from scratch since 2012, said Preh President Christoph Hummel.

In the U.S., Wang has kept Key Safety’s strategy and management in place and, ironically, has benefited from Takata’s air bag troubles. Key Safety, whose revenue has been growing at an above-industry-average 20 percent even before Takata’s crisis, has received orders of more than $4 billion last year alone, some of which were from Takata’s former clients, said Ningbo Joyson CEO Tang Yuxin.

The Takata recalls may eventually cover more than 120 million inflators worldwide, Scott Caudill, chief operating officer for Takata’s U.S. unit TK Holdings Inc., said in a U.S. court document filed Monday.

Ningbo Joyson’s headquarters in Ningbo, Zhejiang Province.

Source: Ningbo Joyson Electronic Corp.

Decisive Entrepreneur

Wang, who goes by Jeff among English-speaking employees, wins praise for his decisiveness and keeping existing management teams in place after acquisitions. “Jeff is easy to talk to and quick to make decisions, a typical entrepreneur,” said Hummel in an interview. “What’s important is that he kept the management teams. So you have this very interesting combination of independence and joint strategy with the right balance.”

Wang is betting big on autonomous driving, auto safety and electric cars. He plans to integrate Preh’s connectivity, telematics and human machine interface technologies with Key Safety’s active and passive safety products.

By 2021, it aims to raise revenue to $10 billion from an estimated $4 billion to $5 billion this year, and boost net profit margin to 6 percent from 4.9 percent in 2015. The company also plans to expand in Southeast Asia and South America markets and enter the Japanese market, said Tang in April.

Risks Exist

“Risks exist, obviously, but opportunities should outweigh risks because Takata has good technologies in passive safety equipment,” said Zhou Chunlin, an analyst at Wanlian Securities Co. in Shanghai. “It’s been doing well in all segments it has ventured into by doing M&As, but the biggest opportunities should come from the safety device segment, because the requirement for safety is even higher due to the arrival of intelligent driving.”

Key Safety will substantially retain all of Takata’s employees worldwide, move its Asia headquarters from Shanghai to Tokyo and doesn’t plan to shut down any of Takata’s manufacturing facilities in Japan, it said. The acquisition of the businesses and bankruptcy proceedings are expected to be completed by the first quarter of 2018, the companies said.

“This has been a very, very dynamic process,” Joe Perkins, chief financial officer of Key Safety, said in an interview with Bloomerg TV. “Our intent in this deal has been to ensure we architect an industry solution with the key goal of ensuring we protect the supply of our valued customer base.”

Key Safety Systems CFO Joseph Perkins discusses the deal to buy Takata for $1.59 billion.

Source: Bloomberg

If the Takata deal goes through, it would be the biggest acquisition in Japan by a Chinese-backed company. It compares with the $1.8 billion Zhejiang Geely Holding Group Co. paid in 2010 to buy Volvo Cars from Ford Motor Co., the biggest overseas acquisition by a Chinese company in the auto industry. GSR Capital, a Chinese private equity firm with backing from the Hubei provincial government, is said to be nearing a deal to acquire control of a Nissan Motor Co. rechargeable battery unit for about $1 billion.

“I always believed that if China’s industrial manufacturing wants to go out, China needs to incorporate global wisdom to develop its indigenous technologies,” said Wang. “China boasts of a big domestic market and that’s an advantage, but in the auto industry, the most advanced technologies are still in countries such as Germany, Japan and U.S.”

— With assistance by Yvonne Man, and Betty Liu

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