Aristech Chemical: Japan’s first big LBO (1990)

Buy, fix, sell — another form of business investment

This decision shows another form that a trading house’s business investment can take. If Brunei LNG was an investment that developed a resource and drew a dividend over the long run, Aristech was an investment that bought a loss-making company with debt, stepped into its management to rebuild it, restored its value and then let it go. Away from both commission-earning brokerage and long-held resource equity, it took a business itself into custody for a set period and lifted its price — and the LBO, as a method, sharply mirrored that mode of involvement.

The road, though, was not smooth. Recession set in just after the purchase, and reaching profitability took six years, $500 million in additional loans and a wholesale replacement of the old management. It was a turnaround that bet on a reading of chemicals as a market that moves in cycles of seven to ten years, and that waited without treating the demand slump as structural. Buy, fix, sell. This pattern — a trading house that had made long holding its creed “turning” an operating company to extract value — reads, from a distance, as a foretaste of the later era that would make portfolio rotation its banner.