Going holding-company, buying Sony’s logistics arm, and the impairment that followed (2014)

On widening, and then binding back together

Reading this sequence only as a failed acquisition seems to make the story too simple. The move to a holding structure, and the run of purchases of manufacturers’ subsidiaries that took 66% of Sony Supply Chain Solutions for about $148.7M (¥18bn), were coherent in themselves as a strategy for absorbing shippers’ logistics arms to widen the base for 3PL and supply-chain management at a stroke. The difficulty lay not in the direction of the expansion but in the view of future earnings written into the purchase prices, and in the speed at which the absorbed functions could be bound back into profitable operations. The gap between expectation and reality can be seen surfacing all at once as the $226.5M (¥25bn) impairment in the year to March 2017.

That said, what this decision left behind was not only a hole. The write-down cut into shareholders’ equity and exacted the resignation of President Fujioka Kei. But returning Mitsui-Soko Business Trust — separated out under the holding company — to Mitsui-Soko after three years, and spending five years compressing interest-bearing debt to about $715.5M (¥94bn), built the base that later absorbed the high earnings of the ocean-freight spike. More than the widening itself, it was where the widened base was made to pay again, and how the damaged balance sheet was folded back up, that revealed the quality of management in this period.