NTN Corp. (Japan) revealed reaching an important milestone in its agreed-upon gradual takeover of SNR Roulements (France, a division of Renault, France).

In a short, low-key announcement, NTN said as of April 7 it acquired enough additional equity in SNR that its ownership now stands at 51%.

The next step, according to the timetable set up in 2006, allows NTN to acquire up to 80% ownership by 2010.

Any graduated acquisition is less than ideal, but in this case reflects the political realities and difficulties NTN faced making this key acquisition work for such a closely-watched segment of French industry.

That NTN has passed the all-important 50% ownership hurdle is testament to their tenaciousness. SNR is a nominally a division of French automaker Renault; but a convoluted ownership and control structure, along with widespread anti-NTN sentiment, initially seemed to doom any potential deal.

By 2005, Renault was in difficult financial and operating conditions, desperate to restructure and reorient the most difficult of its far-flung nonstrategic business operations -- including SNR.

But the protectionist political, regulatory and labor climate was working against any divestiture -- particularly to a non-French company, which politicians and workers felt would jeopardize workers' generous social safety net, working conditions and schedules, state-guaranteed job protections, pensions, and other benefits.

Indeed, French authorities had already blocked INA's takeover of aerospace bearing manufacturer SNFA, a proposition later rejected by the EC as well. There was little reason to believe a foreign buyer for SNR would meet any warmer reception.

NTN did walk away when initial talks with SNR management faltered in 2005. Renault did not back down, and instead "recalled" SNR CEO Gerard Ravouna, replacing him with Didier Simon.

Under Mr. Simon, SNR immediately divested its ball production to NN Inc. (USA).

Mr. Simon also resumed talks with NTN and an initial agreement was reached in early 2006.

SNR workers intensely disliked the idea of losing their state-guaranteed perks, protections and pensions if SNR were sold off to a private company, particularly one based in Japan. In fact, unhappy SNR employees bombarded eBearing.com with emails and phone calls far in excess of what we have ever heard from any other takeover target in this industry.

In mid-2006, they staged a mass walkout from SNR's Annecy headquarters.

After initially proposing a simple one-step acquisition, NTN modified its takeover to a phased plan, reportedly in hopes of forestalling critics in the EU, France, and even within SNR itself.

The acquisition would proceed as follows:
1. Late October 2006 - NTN acquires initial ownership of 35%
2. Late October 2007 - NTN acquires ownership stake totaling 51%
3. Between October 2008 and 2010 - NTN acquires ownership stake totaling 80%

This timetable has been pushed back six months, but is essentially still on track.

The phased-in ownership strategy neatly disarmed many critics of the deal, who suddenly lacked a specific point of reference for complaining about NTN influence or involvement.

In fact, those complaints did fail to gain traction, and the step to 51% ownership came with little fanfare. The long lead time to 80% ownership is likely to sap the last resistance, and the promise that Renault will retain at least 20% ownership may be enough to appease the most vocal critics.

Reaching the 51% milestone, NTN simply commented: "SNR is No. 1 in France and one of the leading bearing manufacturers worldwide. By its joining to NTN group and integrating technical strength, production and market development capabilities of both NTN and SNR, NTN will reinforce business structures and improve its presence, especially in European market."

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