Colt to acquire KVH – the Tokyo based cloud and data center service provider

Colt acquires Tokyo based KVH cloud and data center services provider for US$ 162 million to expand in Japan and Asia-Pacific's growing cloud markets

Colt to acquire KVH for YEN 18.595 billion (€ 130.3 million = US$ 160 million)

The acquisition

Both Colt and KVH were founded with investments by Fidelity Investments and associated companies, Colt in London in 1992, and KVH in 1999 in Tokyo, as telecommunications service providers for the financial industry and other industrial customers. While KVH remained 100% owned by Fidelity and associated companies, Colt was listed on the London Stock Exchange in 1996.

Initially founded as telecommunications companies, both Colt and KVH have developed into “information delivery platforms” based on networking infrastructure, data centers, optical fibre networks and associated management and information services.

On November 12, 2014, Colt announced the plan to acquire KVH for YEN 18.595 billion (€ 130.3 million = US$ 160 million) in cash from KVH’s owner Fidelity Investments.

Since KVH is 100% owned by Fidelity Investments, and Colt have also been founded by Fidelity which is still a shareholder, the acquisition needs to be approved by independent Directors and by independent shareholders of Colt.

A General Meeting of Colt’s shareholder has been announced for December 16, 2014 at 10:00am in Luxembourg where the approval of shareholders of Colt will be sought.

Colt – the “information delivery platform”

Colt was founded by James P Hynes (Jim Hynes) with investments from Fidelity Investments and related companies in 1992 in London, and went public with an IPO on London Stock Exchange in 1996.

Colt operates 20 data centers and substantial optical fiber networks, and has more than 5000 employees.

Colt’s annual revenues are € 1,575.8 million (= US$ 2 billion) in 2013.

Colt market capitalization currently is UKL 1.19 billion (= US$ 1.9 billion).

KVH – “Asia’s information delivery platform”

KVH was founded by Fidelity Investments and related companies on April 2, 1999 in Tokyo.

KVH operates 9 Data Centers, owns optical fiber networks in Japan and to major financial centers in the world, and has about 590 employees.

KVH annual revenues are approx. € 133.6 million (= US$ 170 million) in FY2013, i.e. Colt is about 10 times bigger in terms of market cap and sales than KVH.

KVH owns optical fibre, ethernet, data center data infrastructure in Tokyo, Osaka and other parts of Asia.
KVH owns optical fibre, ethernet, data center data infrastructure in Tokyo, Osaka and other parts of Asia. This photograph shows KVH owned cable infrastructure in the center of Tokyo

The planned acquisition values KVH at YEN 18.595 billion (€ 130.3 million = US$ 160 million), i.e. COLT is about 12 times bigger than KVH in terms of market capitalization/value.

Implications of acquisition of KVH by Colt – view as a Japan (and Asia) market entry by Colt

From the point of view of Colt, the acquisition of KVH – which has always been a sister company via the common investor Fidelity Investments, and common founder Jim Hynes – is a relatively low risk market entry into Japan and several other major Asian markets, and promises to have a very high chance of success for all parties.

We need to keep in mind, that essentially all other large scale market entries into Japan by infrastructure based telecommunication operators have failed: Vodafone, Cable & Wireless, WorldCom’s market entries into Japan’s telecom markets have all failed, and to our knowledge KVH is the only remaining internationally owned telecom infrastructure company in Japan today.

You can read a detailed discussion about why Vodafone failed in Japan in our blog here “Vodafone Japan could have been a business worth US$ 50 billion today. Why did Vodafone Japan fail and sell to SoftBank?”.

Essentially, both Vodafone and Cable & Wireless failed in Japan’s telecom markets, because they did not have the multitude of skills and know-how needed to manage a telecommunications business in Japan in a competitive manner. Colt with the acquisition of KVH acquires this know-how, and KVH at the same time has been an internationally managed company from the outset, so that Colt avoids the risks of acquiring a 100% Japanese companies such as Vodafone had done by acquiring Japan Telecom, with all the cultural issues that this entails.

At the same time, we also need to keep the scale in mind. While KVH has a market capitalization (i.e. the purchase price) of US$ 160 million, it can be argued that Vodafone-Japan could be expected to have a capitalization of around US$ 60 billion today had it been successful – i.e. about 375 times larger than KVH.

Japan’s largest telecommunication operator NTT currently has a market capitalization of US$ 62 billion, i.e. about 390 times larger than KVH, while SoftBank’s market capitalization is about 500 times larger than KVH’s.

Thus, if we see Colt’s acquisition of KVH as a market entry into Japan by a European telecom operator, then this is on an approx. 300-400 times smaller scale than Vodafone’s failed market entry into Japan, and with far better circumstances, and a far higher chance of success, and in our view with very carefully controlled risks.

Without doubt, a merger of KVH with Colt was on the minds of Fidelity Investments and Jim Hynes, when they founded both KVH and Colt in the 1990s.

Japan telecommunications industry market report

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Hitachi Zosen Inova AG acquires Energy-from-Waste (EfW) EPC Axpo Kompogas Engineering AG (Komeng)

Hitachi Inspire the Next

Waste is our Energy! – Energy-from-Waste (EfW)

Hitachi Zosen Inova AG acquires Axpo Kompogas Engineering AG

AXPO agreed on October 24, 2014 to sell its subsidiary Axpo Kompogas Engineering AG to Hitachi Zosen Inova AG (ZHI AG). Closing is in mid December 2014.

Axpo Kompogas Engineering AG (Komeng)

Axpo Kompogas Engineering AG (Komeng) is an EPC (engineering, planning, construction) company planning and constructing dry fermentation plants using the Kompogas process, which produces biogas and compost from biomass via a dry fermentation process.

Address: Flughofstrasse 54, CH-8152 Glattbrugg, Switzerland
CEO: Bernard C. Fenner
Business: EPC (engineering, procurement, construction) and maintenance of Kompogas plants
Established: 2013
Capital: approximately SFR 3.6 million (YEN 425 million)

Kompogas method generates biogas by methane fermentation from kitchen and other organic waste

The Kompogas process was developed about 1988-1989 by the Swiss entrepreneur Walter Schmid initially on his private balcony.

The Kompogas process produces biogas and compost from biological, organic waste via a fermentation process. The resulting biogas can be used for cars and trucks, and the compost as organic fertilizer.

AXPO is an electricity operator, generating, distributing, selling and trading electricity, and is fully owned by cantons of north-eastern Switzerland.

Hitachi Zosen Inova AG (ZHI AG), which became a subsidiary of Japan’s Hitachi Zosen Corporation (日立造船株式会社) with the acquisition of the bankrupt AE&E Inova Holding AG on December 20, 2010, acquires Axpo Kompogas Engineering AG, as of Nov. 5, 2014.

Hitachi Zosen Inova AG (HZI AG) history

Hitachi Zosen Inova AG (HZI AG) was created when Hitachi Zosen acquired AE&E Inova Holding AG on December 20, 2010, after it filed for bankruptcy in Zurich on December 3, 2010, read details here.

AE&E Inova Holding AG goes back to a department for thermal waste management of the Gesellschaft der Ludwig von Roll’schen Eisenwerke which was founded in 1823.

Japan electronics industries – mono zukuri. Preview this report:

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JFE Engineering acquires boiler maker Standardkessel Power Systems Holding GmbH

JFE Engineering globalizes and strengthens biomass and waste electricity generation systems business

Standardkessel-Baumgarte: from a classic boiler maker to biomass and waste-to-energy power plants

JFE Engineering acquires all outstanding shares of Standardkessel Power Systems Holding GmbH, for approximately YEN 10 billion (US$ 87 million), from current shareholders.

Standardkessel (founded 1925) and Baumgarte (founded 1935) started as classic boilermakers, and today supply turnkey power plants and power plant components for fossil energy sources, e.g coal, gas and oil, and also for alternative energy carriers, e.g. biomass, municipal waste, and industrial waste.

Standardkessel Power Systems Holding GmbH is a holding company owning 100% of the shares in the Standardkessel Baumgarte Group, which consists of:

  • Standardkessel GmbH (founded 1925)
  • Baumgarte GmbH (founded 1935)
  • Standardkessel Baumgarte Service Holding GmbH (founded 2008)

Standardkessel-Baumgarte were founded as classic boiler makers, and developed into makers of biomass and waste-to-energy power plant suppliers and service group.

By acquiring Standardkessel-Baumgarte, JFE Engineering can strengthen overseas business, accelerate globalization and move into the biomass and waste-to-energy electricity and power generation sector.

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