Buying into medical devices and aircraft parts: Vaupell and Kawasumi (2014)

A third field assembled by purchase

Filing this run of acquisitions under “diversifying away from semiconductors” mistakes what the company is. Sumitomo Bakelite has always earned less from making a material than from fabricating it for a particular use — insulating board, then encapsulant. The roughly $256M (¥27bn) paid for Vaupell was a move to take in from outside another such fabrication field, aircraft interiors supplied to Boeing and mouldings for medical devices, pointing the resin-processing skill honed on encapsulant at a different set of buyers. The $84.5M (¥8bn) net loss in the year to March 2009 appears to be what pushed the company to commit to a third field when it did.

Assembling that third pillar, though, took a long time. Seven years ran from the 2014 Vaupell purchase to the full acquisition of Kawasumi and the launch of SB Kawasumi, across two large deals of about ¥27.1bn and ¥27.0bn. Resin moulding for aircraft parts and medical devices such as catheters and dialysis circuits are different businesses, and running them as one field required a corporate split to rearrange the organization. Asked where to stabilize the earnings that encapsulant generates, Sumitomo Bakelite spent time and money buying its answer in from outside.