Sumitomo Metals's Narumi in MBO, Chinese Firm Does Financing
Narumi China of Nagoya, a subsidiary of Sumitomo Metals and one of Japan's top makers of bone china tableware, will go private through an MBO funded through CITIC Capital Holdings, a state-owned Chinese investment management and advistory firm. The new ownership's business plan is to expand into China and Southeast Asia and, according to the press release, go public in three to five years. Citic Holdings will have 75%-80% of the newly issued shares, Narumi's 12-member management team will have 15% to 20%, and Sumitomo Metals will hold 10% for the next two years. Narumi's

As a business proposition, the MBO appears to make good sense. Within the Sumitomo Metals family, Narumi was a noncore holding that lied outside the company's main business. In its new incarnation, funded by an established Chinese investment firm, Narumi appears well positioned to expand outside Japan and achieve higher growth.

MBOs financed by foreign funds are still relatively new in Japan, but CITIC Capital already has some experience doing it for medium-sized companies. The best known example is Pokka, a leading soft drink manuracturer, which was done in 2005.