Japanese lift maker Fujitec explores sale to private equity

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Japan’s Fujitec has held talks with private equity groups about a potential sale of the $2.5bn lift maker, in a move that may signal further consolidation in the $80bn global elevator industry.

Fujitec, founded in Osaka in 1948, is working with UBS in Tokyo to find a buyer and has held talks with a number of private equity groups, including Sweden’s EQT, according to multiple people familiar with the matter.

Other major international private equity groups that spoke to Fujitec in recent months did not move forward for various reasons, including price, said the people.

Fujitec, EQT and UBS declined to comment.

Fujitec has a market capitalisation of ¥381bn ($2.5bn). Its share price is up more than 35 per cent this year and has trebled over the past five years. It has been involved in a running governance battle with activist investor Oasis, which still owns almost 20 per cent of the company, according to LSEG data.

US-based Farallon Capital Management has also taken a 6.6 per cent stake, revealed in filings this month. Oasis and Farallon did not respond to requests for comment.

The improving valuation is partly due to the belief that pressure from activists and other shareholders could lead to radical action from Fujitec, including a sale, since the company could be more valuable as a consolidation play than a standalone business, said investors.

Support for chief executive Masayoshi Harada has sunk from 94 per cent last year to only 60 per cent of shareholders voting for a resolution this year for his re-election to the board.

Buying the maker of lifts, escalators and moving walkways would give private equity access to a lucrative business that brought in ¥229.4bn in revenues in its 2023 fiscal year and boasts long-running maintenance contracts. The sector’s business model is to sell lifts at low margins and then make long-lasting revenues with higher margins on maintenance and modernisation.

It would also offer merger opportunities in an industry highly fragmented outside the “big four” — Otis, Schindler, Kone and TK Elevator. One longtime Fujitec investor suggested that an eventual merger with Mitsubishi Electric could be an option. Japan’s Hitachi and Toshiba also have lift businesses.

Other private equity groups have already entered the sector with Advent and Cinven buying TK Elevator, formerly part of German industrial conglomerate Thyssenkrupp, for €17.2bn in 2020.

However, manufacturers have struggled after a downturn in the Chinese property market, which accounted for more than half of the 1mn new units installed globally last year, according to leading Finnish elevator group Kone.

Fujitec is pinning its growth hopes on the Indian and Indonesian markets, as it seeks to revamp its strategy in other markets such as Japan and North America, as well as execute a turnaround plan or exit in China.

Modernisation of elevators provides a big opportunity for manufacturers and the private equity groups backing them. Globally, the number of lifts over 15 years old that need overhauling is set to grow in the high single digits percentage-wise each year from the current level of 10mn units.