Scandal-hit airbag maker Takata is in talks for a rescue from likely bankruptcy by KKR, according to sources.
Facing the consequences of the largest-ever U.S. safety recall after its air bag inflators malfunctioned, Takata named an outside committee in February to lead an overhaul. Those advisers said on Wednesday that they had hired investment bank Lazard to counsel on the financial restructuring. The sources, who cannot be named as they are not authorized to speak to the media, did not detail the stake sought by KKR. One of the sources said the U.S. fund had approached the steering committee. Earlier, Japan's Nikkei newspaper reported KKR had proposed taking about a 60 percent stake in Takata and submitted a plan. KKR and Takata declined to comment, but reports of the talks drove up the company's battered shares by its daily limit to trade 21 percent higher, closing at 458 yen. Selecting a financial sponsor would likely require discussion with Takata's automaker clients and stakeholders. The group, which posted a net loss of 13.1 billion yen ($120 million) for the year ended in March, had been expected to draw-up a shortlist of financial backers by August, and reach a deal the month after.
After Nikkei first reported KKR’s interest in Takata, shares of the air-bag maker hit a limit high on hopes that it was nearing a cash infusion to help the company restructure. Takata has been negotiating with auto makers over the ballooning costs it faces for rupture-prone air bag inflaters linked to 11 deaths and more than 100 injuries world-wide. However, the person said it was too early for any investment decisions to be made, adding that the steering committee, Takata’s lenders and auto makers hadn’t yet hammered out any details for potential investment proposals. The steering committee is made up of business, financial and legal experts in Japan.
A top priority is to ensure an uninterrupted flow to customers of seat belts, steering wheels and other products in addition to the replacement inflators. And then there’s management. Takata said its governance structure needs reforming -- code for cleaning house. President Shigehisa Takada has already said he’s ready to resign to placate investors, a person familiar with the matter said in January. Any Takata suitor will be betting it can still make a return after resolving claims from automakers, which until now have shouldered the vast majority of the costs of replacing the bags. Recalls of the devices, which can deploy with too much force and spray shrapnel, are expanding by as much as 40 million units in the U.S., after regulators said the death toll rose to 13 worldwide.