Houlihan Lokey Advises CMIC Holdings

Houlihan Lokey is pleased to announce that CMIC Holdings Co., Ltd. (CMIC), Japan’s largest contract research organization (CRO) company, has agreed to a tender offer of CMIC shares by Hokuto Management Inc. (HOKUTO) as part of the management buyout effected on November 7, 2023, and HOKUTO has launched a tender offer at a share value of US$302 million which was completed on March 30, 2024.

CMIC was the first company to provide CRO services in Japan and is currently the largest company in the Japanese CRO market. CMIC provides a wide range of healthcare-related businesses, including its mainstay CRO, CSO, SMO, and CDMO, based on its unique pharmaceutical value creator (PVC) business model, which fully supports the value chain of pharmaceutical companies. The company is publicly listed on the Tokyo Stock Exchange. In FY2023, the company generated revenues of US$700 million and an EBIT of US$69 million.

HOKUTO, is a special-purpose company established by Mr. Nakamura, the founder and current Chairman of CMIC, for the purpose of this transaction.

This is the second management buyout deal by a CRO company in Japan following EPS Holdings and is one of the few management buyout deals without an external sponsor in Japan.

Mr. Nakamura made the decision to carry out the management buyout in light of the shifting business environment brought about by the slowdown in the growth of the Japanese CRO market, the convergence of COVID-19, and the advancement of digitalization in the field. This is because it is crucial to establish a management structure that enables flexible and prompt implementation of drastic measures such as upfront investment for future business development and reviews of personnel evaluation and compensation systems.

A premium of 54.2% above the closing price of ¥1,719 the day before the announcement (November 6, 2023) was paid per share at the offer price of ¥2,650/share. The transaction was announced on November 7, 2023, and is expected to close at the end of March 2024.

Houlihan Lokey served as the exclusive financial advisor to CMIC. This transaction highlights Houlihan Lokey’s extensive expertise in the healthcare space, particularly in CRO services, and exceptional capabilities in advising tender offers and management buyouts.