GPIF Is Reportedly To Start Overseas Infrastructure Investments

According to The Nikkei Asian Review today:

 Japan's pension fund behemoth to invest in infrastructure abroad
TOKYO -- Japan's Government Pension Investment Fund (GPIF) will diversify its portfolio beyond bonds and stocks for the first time, targeting high-return overseas infrastructure.

     The public pension fund has some 120 trillion yen ($1.16 trillion) in assets under management. About 60% of that is in Japanese bonds, with the rest allotted to foreign bonds as well as domestic and international stocks.

     Under a partnership with the Ontario Municipal Employees Retirement System, a Canadian pension fund, it now plans to invest in airports, railways, ports and power facilities in the U.S. and Europe.

     Joint management will begin in 2014. Between tens of billions of yen and hundreds of billions of yen will likely be invested, although the exact amount has yet to be set.

     Last month, a panel of experts recommended to the government that the GPIF step up stock investment and begin putting money into infrastructure and real estate as well, in view of how the nation is moving to overcome deflation.

     Although infrastructure comes with the risk that the assets must be held for the long haul, it tends to offer higher returns than bonds and equities. Globally, pension funds are said to have far more than 20 trillion yen invested in infrastructure funds.

     The GPIF is in talks with other foreign funds to form similar partnerships, suggesting that it may raise the cap on infrastructure investment in the future.

     The fund has limited personnel that can handle new areas of investment, so the Ministry of Health, Labor and Welfare -- which oversees the GPIF -- decided Thursday to bump up the pay scale at the GPIF in an effort to bring aboard more investment experts.


The second paragraph from the bottom should better read (based on the original Japanese report)

    The GPIF is in talks with other foreign PENSION funds to form similar partnerships, suggesting that it may raise the cap on infrastructure investment in the future.

The source of information for this Nikkei article was not disclosed.

Reuters and Bloomberg also reported that Development Bank of Japan is a part of the reported GPIF/OMERS co-investment scheme.

Japan GPIF to buy inflation-linked JGBs, join Canada OMERS on infrastructure-sources

5:00pm EST TOKYO, Dec 12 (Reuters) - Japan's Government Pension Investment Fund, the world's largest public pension fund, will start buying inflation-linked government debt from April and will join Canada's OMERS in investing in infrastructure projects abroad, people familiar with the process said on Friday.

The $1.2 trillion fund will buy more than 400 billion yen in Japanese government bonds whose principal increases with rises in the nation's consumer prices, the sources told Reuters on condition of anonymity.

In tying up with OMERS, one of Canada's largest pension plans, GPIF joins a big investor with experience in infrastructure and will also be joined by the government-owned Development Bank of Japan, the sources said.

A spokeswoman for OMERS in Toronto was not immediately reachable for comment.

GPIF carries great weight in financial markets because of its enormous size and its role as a leader of other Japanese public funds, which have total assets of more than $2 trillion. 

The fund is under pressure to overhaul its portfolio, which is heavily weighted towards very low-yielding straight JGBs, as part of Prime Minister Shinzo Abe's drive to boost returns to help support Japan's burgeoning elderly population. Abe also wants to channel the nation's vast pools of financial assets towards riskier investments and more productive uses.

Earlier this month, GPIF president Takahiro Mitani told Reuters he had a strong interest in buying inflation-linked JGBs as an inflation hedge for the fund's portfolio but noted that the current amount is very low. The government plans to double its issuance of inflation-linked JGBs to 1.2 trillion yen next fiscal year as Abe pushes to break Japan free from 15 years of deflation, government sources said at the time.

GPIF is also considering further investment in alternative assets, such as private equity, as recently recommended by a government panel, one source said on Friday.

A government advisory panel has been looking for ways to have GPIF help revitalise Japan's capital markets, finding more productive uses for the country's $15 trillion in household assets, which are largely locked in very low-yielding bank accounts and Japanese government bonds. (Reporting by Chikafumi Hodo and Takaya Yamaguchi; Additional reporting by Euan Rocha; Writing by William Mallard; Editing by Chizu Nomiyama)

Bain To Invest JPY 17 Billion In Macromill Take-Private

Bain Capital has initiated a TOB to acquire 100％of outstanding shares and stock options issued by Macromill, Inc., which conducts internet-based marketing research in 87 countries with  the top market position in Japan and Korea.

The maximum amount of share purchase will be JPY 53 billion including fees.  The purchase price was set at 29.3% over the last 6 month average share price. Yahoo Japan is the largest shareholder with a 22.4 % stake.

Bain will invest JPY 17 billion through an SPC and up to JPY 36 billion will be financed by Mizuho Bank (JPY 28 billion) , Mizuho Capital Partners' mezzanine fund #2  (JPY 2 billion), Mizuho Securities Principal Investments (JPY 2 billion) and Chuo-Mitsui Private Equity Partners #8 (JPY 4 billion).

Macromill has a revenue of JPY 17 billion with JPY 4.2 billion EBITDA for the FY ending June 2013. The company had a net cash of approx. JPY 8 billion. Macromill aims to invest more aggressively in its research systems as well as business development globally by going private.

INCJ To Promote Japanese Venture Industry Via Robust Database And Large LP Commitments

The Innovation Network Corporation of Japan (INCJ) has announced that it will support Japan Venture Research Co. to create a robust venture company database. INCJ aims to foster a venture eco-system by promoting the use of such date base by venture capitalists, strategic and financial investors, entrepreneurs, industry professionals and academics. According to Nikkei, INCJ considers an extensive database on venture companies is essential for the growth of Japanese venture industry and for the  promotion of venture investments from home and from overseas. The venture database will have 10,000 companies and their basic information will be made available for free.

In October this year, INCJ made its first investments in venture funds as an LP by committing JPY 10 billion to UTEC (The University of Tokyo Edge Capital) 's 3rd fund.  In November, it made JPY 6 billion commitment to medical device incubation fund MedVenture Partners #1 with Mizuho Bank, followed by another JPY 10 billion commitment to ICT-focused Global Brain 5th fund.

Tokio Marine To Set Up A Mezzanine Fund

On Dec 3rd, Tokio Marine & Nichido Fire Insurance announced that it will establish a new subsidiary,  Tokio Marine Mezzanine Corp. which will manage a JPY 30 billion (target) mezzanine fund.
Tokio Marine will commit  JPY 10 billion from its balance sheet.

Tokio Marine has arranged 20 mezzanine financing deals since the 1990s, one of which involved Japanese sushi restaurant operator Akindo Sushiro.

Tokio Marine CP Sells Barneys Japan To Seven & i

Tokio Marine Capital Partners has agreed to sell its 49.99% holdings in Barneys Japan to Seven & i Holdings, which holds major department store operator Sogo & Seibu,   in addition to 7-Eleven and supermarket chain Ito Yokado.

The sale of the Japanese business of Barney‘s New York is reportedly for JPY 6 billion. It logged sales of JPY 19.5 billion last fiscal year and expects a higher number this year aided by increased spending on high-end goods.

In 2006, Tokio Marine and Sumitomo Corp. jointly acquired Barneys Japan from Isetan, another major  department store operator. Isetan had acquired a stake in Barneys New York in 1989 and later suffered a USD 400 million write-off when Barneys NY went bankrupt.  

Sumitomo Corp. will continue to hold a 50.01% stake in Barneys Japan. 

This makes the 3rd exit from Tokio's 2005 vintage fund. Last week, Bushu Pharmaceuticals, the last portfolio company of Tokio's 2005 fund, acquired a pharmaceutical plant nearby Tokyo from Eisai Co. The acquisition will triple Bushu's production capacity. 

Advantage To Sell 9.5% of Nissen To Seven & i

Seven & i Holdings Co.,  the parent of Seven Eleven and Ito Yokado supermarket chain has announced that, through its subsidiary Seven & i Net Media,  it will acquire up to 50.74% of Nissen Holdings, a catalogue and online retailer, through a TOB. Seven & i aims to bolster its catalogue/online merchandising operation by having Nissen as its subsidiary.

The TOB price is set at JPY 410,  which represents a 27.7% premium over the past 6 month average share price. 

According to Seven & i filing documents, Advantage has agreed to sell its remaining 9.5% holdings, which will bring JPY 2.36 billion to the fund. Advantage had purchased 14.4% of Nissen in 2007 at JPY 780 a share through a private placement.

The largest shareholder, UCC  (Ueshima Coffee)  Holdings will also sell its 20.9% holdings in Nissen. 

Advisory Panel On Public Funds: Key Recommendations

Advisory panel formed under the Cabinet Office regarding the management of $ 2 trillion public and quasi-public funds that are currently managed by the below institutions submitted its final report on November 20th.

• Government Pension Investment Fund (GPIF) ($1.2 trillion) 
• Federation of National Public Service Personnel Mutual Aid Associations (KKR) ($78 billion), 
• Pension Fund Association For Local Government Officials ($175 billion) 
• The Promotion And Mutual Aid Corporation For Private Schools Of Japan ($36 billion) 
• Other 100 public institutions
• 86 national universities.

The below are some of the recommendations the panel made in the report.

1. The public funds should review the current portfolio allocation that is heavily biased towards domestic bonds.
2. The public funds should review their investment return targets and risk tolerance levels.
3. For increased portfolio diversification, the public funds should consider investing in new asset classes, such as REITs / real estate, infrastructure, venture capital, private equity and commodity. 
4. The public funds should consider increasing allocations to active management funds. Establishment of a "baby fund" (an internal segregated account) may be considered for more flexible deployment of capital.
5. The public funds should review appropriate benchmarks for passive investments. For Japanese equity, new benchmarks, such as JPX Nikkei 400 that focuses on constituent stocks' ROE, may be considered.
6. Ministries overseeing the public funds should duly entertain the initiatives of each fund management institution.
7. It is desirable that key investment decisions are made collectively by investment experts who work on a full-time basis and who are free of conflict. 
8. To invest in new asset classes and to have robust risk management capability, it is necessary that the public funds are amply resourced and staffed with top-class professionals. To this end, the HR and expense restrictions imposed by past cabinet decisions should be relaxed. 
9. GPIF should be reorganized under a new law that specifically caters to its unique status. GPIF should be given a higher degree of independence and authority on the condition that it maintains a high level of transparency and accountability. The change should enable key decisions be made by its board, whose member would be conflict-free investment experts. As an interim measure under the existing governing law, transferring/delegating investment decision making authority from the CEO to an investment committee made up of conflict free investment professionals should be considered. 
10. "Forward looking" risk management should be introduced and attentions should be paid to inflation risks. Investing in inflation-linked JGBs and use of derivatives should be contemplated for risk mitigation. 
11. The public funds should consider more active use of shareholder rights, despite their public nature, in order to maximize investment returns.  
12. GPIF should immediately work on the followings: 

              - Review of investment allocation within the current base portfolio
                guidelines, increasing allocations to active funds

              - Review of risk/return target
              - Review of benchmarks for passive investments
              - Application of forward-looking risk management,
                inflation risk hedging

         

              GPIF should work on the followings in the next 12 months:
              - Revision of base portfolio allocation
              - Introduction of new asset classes
                (mainly those with liquidity and NAV transparency)
              - Establishment of a baby fund
              - Employment of full-time committee members and investment
                professionals with significant expertise

        

             GPIF should work on the followings with necessary
             legislative changes.
            - Introduction of new asset classes
              (with lower liquidity and lower NAV transparency)
            - establishment of fully-empowered board

       

Nomura And Intermediate Capital To Launch Mezz Fund JV

Nomura has announced that it will form a 50:50 JV with Intermediate Capital that will manage a Japan-focused mezzanine fund and each institution has agreed to allocate JPY 10 billion to the fund. The below is excerpts from the press release:

"FOR IMMEDIATE RELEASE 16:00 JAPAN, 07:00 UK, 21 November 2013
Nomura and ICG Announce Agreement to Facilitate Planned Japanese Domestic Mezzanine Fund

Nomura Holdings, Inc., Asia’s global investment bank, and Intermediate Capital Group plc, the specialist investment firm and asset manager, have agreed a 50:50 partnership that will facilitate the future structuring and distribution of new domestic mezzanine investments and funds, to be managed by a local Japanese fund management company that will be established. Nomura and ICG have agreed to allocate Yen 10bn each to the initiative.

It is planned that a fund would provide institutional investors opportunities to invest in mezzanine debt with financial sponsors and in growth/expansion capital. As the market in Japan benefits from the current government’s economic initiatives the demand for mezzanine is anticipated to rise. Offering mezzanine investment within a fund structure opens up new opportunities to institutional investors. Any future funds structured as a result of the agreement will be jointly seeded, distributed and co-managed between Nomura and ICG."

Carlyle Is Set To Further Divest Chimney Through The TOB Announced By Yamaya

According to disclosure documents filed by Carlyle today,  Carlyle has entered into an agreement with Yamaya Corporation, Tohoku-based liquor retailer, where Carlyle funds will subscribe to the tender offer announced by Yamaya to acquire up to 50.22 % (or 48.66% excluding the exiting holdings) of Chimney Corporation, bar and casual restaurant chain operator.

The TOB price is set at JPY 1510 per share, which equates to a premium of 51.6% over the last 3 months average price and and 53.6% over the last 6 months average price. Total proceeds to buy a 48.6% stake of Chimney is JPY 14.3 billion.

Carlyle had delisted Chimney through a tender offer announced in November 2009 for approximately JPY 20 billion and subsequently squeezed out minority share holders.

In December 2013, Chimney was re-listed and Carlyle sold about 1/2 of its holdings. Currently, Carlyle funds collectively own 48.42%. The IPO price was JPY 945.

 Given the TOB ceiling is only 50% of the outstanding shares, (my understanding is that) there is no guarantee that Carlyle can sell all its stakes at the TOB, but the sale at this price for any amount would improve the return of Carlyle Japan II Fund.

Polaris Sells Nippon Oil Pump To Wendel

Polaris Capital Group announced the sale of Nippon Oil Pump Co., Ltd. (NOP) to a French listed investment group, Wendel, on 31 October.

According to the release,
NOP, with 94 years of history, has been engaged in designing, developing, manufacturing and selling hydraulic pumps and motors, enjoying more than 90% of domestic market share as well as substantial global market share for trochoid pumps principally used for circulating lubricating and cooling oil in metal cutting machine tools.

Polaris bought NOP from Takumi1st Fund managed by Japan Private Equity Co., Ltd. back in 2008. With the sale of NOP, Polaris has divested 4 portfolio companies out of 8 investments made by its 2nd fund.

Ant Acquires A Majority In 140 Years Old Shoe Maker MoonStar

Ant Capital has acquired a majority stake in shoe manufacturer MoonStar from its founding family and from its business partners. MoonStar was established in 1873 and is one of Japan’s major shoe manufacturers. It has operations in Japan, China and Vietnam and developed its own brand. It also does contract manufacturing work for global shoe manufacturers such as K-Swiss, Burberry and Disney.

No financial details are disclosed. This is the second deal from Ant's 4th SME-focused buyout fund.

For those who are interested in cute kids shoes, please see: http://www.moonstar.co.jp/product/company.php

J Star Divests Tokachi To Mediaflag

J-Star has sold its stake in Japanese-style confectionery Tokachi to Mediaflag (TSE 6067) for an undisclosed amount. The sale was originally reported on 18 September for the execution towards the end of October. The motivation of Mediaflag, provider of sales support and mystery shopping services for consumer goods companies, to acquire a small confectionary producer and retailer is quite intriguing. From the press release,  it appears that Mediaflag is trying to apply its marketing and operational know-how to improve Tokachi's profitability and it expects the small retailer also functions as a "labo" for their marketing support and data collection activities. Tokachi, together with its 100% subsidiary Tachibana, reported the combined sales of around JPY 2.1 billion and combined losses of around JPY 50 million in the past 3 years. J-Star acquired Tokachi in August 2007 from the founder and had Tokachi acquire Tachibana in March 2008.

According to PEI, "The exit multiple, according to a source with knowledge of the deal, was 1.3x.
J-Star declined to comment."

In July, J-Star closed its second SME-focused fund with JPY 20.4 billion, of which approx. 40 % were committed by overseas investors.

Polaris's Fusen-Usagi Filed For Bankruptcy

Fusen-Usagi Corporation, apparel maker specializing in baby/kid clothing, filed for bankruptcy at Osaka Regional Court on October 15th with JPY 3 billion debt. Fusen-Usagi has been invested by Polaris Capital's 1st fund since 2006. According to Teikoku Data Bank, the kid apparel maker has been divesting real estates, closing unprofitable overseas operations and streamlining corporate structures with a substantial restructuring under Polaris. Nonetheless, sharp decline in sales finally brought the  97 year old company to bankruptcy. The 2013 sales stood at JPY 6.2 billion, less than a quarter of  JPY 26.6 billion in 2000.

Ant Capital Sells Muginoho Holdings To Nagatanien

Ant Capital has agreed to sell 100% of Muginoho Holdings, which bakes creampuffs branded “Beard Papa” and operates sweet shops and noodle shops to Nagatanien (TSE 2899) for reportedly JPY 9.44 billion.  According to PEI, it represented a return on capital of 3.3x.

Nagatanien is a very well-known household name, manufacturing processed instant food, such as instant miso-soup, "ochazuke", sushi seasoning and noodles. It has approx. JPY 69 billion in sales in FY 2013.

Nagatanien was apparently attracted by Muginoho's overseas franchise as it seeks to beef up the sales outside of Japan. Muginoho has approx. 400 shops globally, of which 200 are in 17 countries including the US, Indonesia, Vietnam, Thai, Singapore and China.

DRC Capital Sold Casa (ex-Rento Go) To Ant Capital

It was announced that DRC Capital has sold Casa, formerly called Rento Go and provider of rent guarentee that is typically needed in Japan when an individual rents a unit from the unit owner, to Ant Capital Partners.

According to the DRC press release;

Assignment of all the stake in Casa inc. held 100% by the investment funds managed by DRC Capital (Japanese Limited Partnerships DRC I and DRC II, and DRC Capital Fund, LP and DRC Investment Fund, LP) was completed on September 30 when the stake was sold to the firm's management and an investment fund managed by Ant Capital Partners Co., Ltd. DRC's involvement in Casa dates back to October 2008 when it took over the rent guarantee business carved out from Re-plus Inc. who failed for other reasons. DRC has since rebuilt the business to today's solid state with a high growth rate and profitability. The management and Ant Capital Partner's investment fund have now taken it over as a management buyout scheme.

DRC apparently acquired the rent assurance business from the failed real estate company at such a low price  that one would look for from a turnaround situation. As such, the exit ROI seems to be quite high, even though the valuation (EBITDA multiple) of today's Casa may be reasonable.

This is the first investment from Ant Capital's latest fund, Ant Catalyzer IV, which was closed last year.

DRC, on the other hand, may be starting next fund raising early next year.

Integral Acquires A Stake In Restaurant Chain TBI Group

Integral has announced that it has acquired a part of TBI Group, restaurant chain operator with 78 shops. TBI is also involved in real estate business, advertising agency business travel businessand apparel business with USD 75 mil in revenue in 2012. No transaction details were disclosed.

http://www.tbi-group.co.jp/global/index.html.

Government Panel Suggests GPIF Status Change

The below is a DJ article on the press conference on the interim report by the government-appointed advisory panel, which name in direct translation is "an expert panel for an advanced / more sophisticated investment, risk management, etc., of public and quasi-public funds". It is interesting to note that the DJ article refers to private equity and infrastructure and other Japanese media cited real estate and infrastructure as potential avenue to increase GPIF's portfolio diversification. What is not explicitly reported in the DJ article, however, is that the panel has discussed and is likely to propose a change of GPIF's legal status from the current ”independent administrative corporation” to "permitted corporation" - the same status as the Bank of Japan. Such change would give more free hand to GPIF and help the institution to evolve itself closer to its global peers.

Thursday, September 26, 2013
DJ: Panel Tells Japan's Public Pensions To Fix Bond-Heavy Portfolios
TOKYO--Japan took a step toward revamping its over Y160 trillion ($1.6 trillion) public-pension system on Thursday, with a government-appointed advisory panel suggesting a shift in money from government bonds to higher returning assets like real estate and private equity.

Many members of the panel were also in favor of looking into using financial products like derivatives to protect against fluctuations in the market and attracting skilled investment professionals by increasing the salaries on the payrolls of each of the funds.

The ideas, which were unveiled in the panel's preliminary report, are still largely abstract and under discussion. Even after the panel's recommendations come out later this year, they'll have to be approved and implemented by the Japanese government.

Yet the steps could, if implemented, signal a sea change in how those trillions of yen are invested, unleashing a flood of cash into global markets as well as the Japanese economy. On Thursday, the yen strengthened against the dollar on mere speculation on what the report could say.

"If you reform portfolios and governance, you can manage assets in a way that contributes to Japan's growth," Takatoshi Ito, a professor of economics at the University of Tokyo and head of the seven-person panel, told reporters after the release.

Prime Minister Shinzo Abe has also singled out reform of the public pension system -- in particular the Y120 trillion Government Pension Investment Fund -- as key to Japan's long-term economic recovery, after two decades of stagnation. Around 60% of the GPIF's money is now in low-yielding Japanese bonds because public opinion has been overwhelmingly in favor of avoiding losses from assets viewed as having higher risks, such as stocks.

Yet the panel's report urged public pensions to quickly respond to the risks of a bond-heavy portfolio as the government and central bank are working to end 15 years of falling prices. Inflation is the enemy of bonds because rising prices erode the value of the bond's fixed interest payments and principal.

"Up until now we were in deflation, but are moving into inflation," said Mr. Ito.

If the GPIF is remade in line with global peers, with professional and independent management that actively searches for the best returns, that could affect everything from the government's fiscal health to the amount of money that flows into the country's stocks and real estate to the amount of pressure investors put on Japanese companies to perform well.

An activist GPIF, for instance, might finally be able to make Japanese corporations more transparent and responsive to investors, said Masaaki Kanno, chief economist at JP Morgan in Tokyo and a member of the panel.

The panel members were in consensus about reducing bond holdings, and most agree the panel needs to invest in a diversity of assets, including infrastructure and private equity. Asset managers say that could also be a cue for other domestic institutional investors to look into diversifying their own portfolios.

"It doesn't say anywhere in here, 'Increase bond investments.' But you can read 'reform bond-centric portfolios,' as 'it's better to lower the percentage of bond holdings," said Mr. Ito when asked whether the panel's suggestions could mean more money in Japanese stocks. "But I don't think we as a panel will go as far as to say" specifically how much of other assets holdings to increase to make up for a decrease in bond holdings.

Funds could "look at returns and volatility over a five or 10 year span, and think not simply about making and holding a portfolio, but whether there's something better out there," said Mr. Ito. "It's something only pensions can do."

The panel did not, however, come to a final decision about issues surrounding how much of a say the funds should have in their investment decisions, whether the funds should be headed by just one president, and how much of a say those covered by the plans should have in their investment decisions.

Mr. Ito said that the panel would submit its final recommendations in November.

Panasonic To Sell Health Care Unit To KKR

The Nikkei  reported that Panasonic Corp. (6752) has reached a basic agreement to sell 80% of its health care business, Panasonic Healthcare Co.,  to KKR for nearly JPY 150 billion (USD 1.5 billion).

The parent will retain the remaining 20% stake, given that it still has some outstanding R&D projects in the field. Panasonic Healthcare Co. makes electronic chart systems and sensors for measuring blood sugar levels, generated JPY 8.7 billion in operating profit on sales of JPY 134 billion in the year ended March 2013.

Panasonic announced plans in March to sell off its health care business, and has accepted bids since May. In the final round in August, KKR and two others, reportedly Bain Capital / Mitsui &Co. / Development Bank of Japan consortium and Carlyle/Toshiba consortium, took part. Earlier this month, the electronics firm gave KKR preferential negotiating rights.

The process indicates that no Japanese local PE firms can be a serious contender in a large size buyouts, which can be attributed to the lack of investable capital at most Japanese funds as well as their unwillingness to match aggressive pricing in the auctions.

Panasonic To Give KKR Preferential Negotiation Rights Over The Sale Of Its Health Care Unit

The Nikkei reported that Panasonic Corp. (6752) appears set to give U.S. investment fund Kohlberg Kravis Roberts & Co. preferential negotiating rights over the sale of its health-care business.

According to the article:

The consumer electronics giant is expected to sell the majority of its 100% stake in Panasonic Healthcare Co. to KKR for about 150 billion yen. The companies will soon launch negotiations on asset prices and sales conditions, with the aim of reaching an agreement by the end of this month. 

Panasonic Healthcare, which manufactures such products as blood-sugar sensors and electronic medical-record systems, has annual sales of about 110 billion yen. Although the company is profitable, it has been seeking to secure more investment funds to increase its revenues and expand overseas.
Panasonic in March announced its decision to solicit outside funds. KKR, U.S. fund Bain Capital and Toshiba Corp. (6502) participated in the final bidding on Aug. 26.

Longreach Acquires Hitachi Via Mechanics

The Longreach Group announced that it has signed an agreement with Hitachi Ltd. to purchase 100% of its subsidiary, Hitachi Via Mechanics, Ltd. The financial closing date for the Transaction is scheduled for 31 October 2013.

According to the press release of August 21, "Hitachi Via Mechanics is a leading manufacturer of micro-drilling machines for printed circuit boards and provides global customers with a range of products including spindle drilling machines, laser drilling machines and pattern edging lithography equipment (exposure machines) . The Company has one of the leading market shares worldwide in spindle micro- drilling machines and laser drilling machines and is one of very few global players with ultrafine and high precision drilling technology that can achieve the requirements for the latest smart phones and other mobile devices."

Hitachi Via Mechanics and its subsidiaries have 1,100 employees. No financial terms are disclosed.

Bain Divests 75% of Domino's Japan For JPY 12 billion

Bain Capital has reportedly sold 75% of  Domino's Pizza Japan to Australia's Domino's Pizza Enterprises Ltd. for JPY 12 billion (US$123.4 million).

According to Dow Jones and the Nikkei reports, Australia's Domino's Pizza also agreed to provide JPY 9 billion worth of debt,  giving the Japanese business an enterprise value of 25 billion yen. Brisbane-based Domino's owns the franchise rights for the Domino's brand in Australia, New Zealand, France, Belgium and the Netherlands, which account for about 10% of the global franchise.

Bain Capital would retain 25% of the Japanese Domino's company.

Bain bought 100% of Domino from Higa Industries and Duskin Co., Ltd. for JPY 6 billion in 2010.
With a modest leverage,  Domino's Japan joins the league of high multiple exits in Japan buyouts in the recent past.

Japan-Focused GP's Fund Raising Round-Up

According to media reports and market sources,

- Advantage Partners has closed its latest fund with JPY20 billion. The "bridge" fund will have a two-year investment period.

- Carlyle Japan Partners III has reportedly reached its first closing with JPY 26 billion. The target fund size is JPY 100 billion.

- J-Star has completed fund-raising for its 2nd funds with JPY 20.4 billion.

- Japan Industrial Partners reportedly raised USD 300-400 million from overseas investors for its 4th fund.

- PEI reported that Unison Capital will receive approx. USD 130 million from Korea's NPS alongside with MBK and Vogo. Unison has not yet officially started fundraising for its 3rd fund, which is said to have JPY 100 billion target.

Japan's Civils Servants' Pension Ponders Asset Re-allocation

According to a Reuters report dated August 6th,

 "The pension fund for Japan's civil servants is considering changing its ultraconservative investment strategy to allow more of its $80 billion to go into stocks and less into domestic government bonds., people familiar with the matter said. The move by the Federation of National Public Service Personnel Mutual Aid Associations, which covers 1.24 million active and retired public servants, follows a shift towards riskier investments by Japan's Government Pension Investment Fund, the world's biggest pension fund with $1.2 trillion in assets."

"Prime Minister Shinzo Abe is pushing public funds to increase returns as part of measures to revive the economy's fortunes. His growth strategy seeks to mobilise Japan's enormous public savings, such as GPIF and the civil servants' pension fund."

"The civil service federation's decision, expected around autumn, also shows the influence of the giant GPIF. Although the broader fund only tweaked its investment strategy, its enormous financial firepower means a potentially big slowdown in investors' purchases of government debt, which is now being bought in massive amounts by the Bank of Japan as part of its aggressive monetary easing." 
"The federation is expected to change the portfolio model that is heavily weighted to domestic bonds," one of the sources told Reuters. "It is considering revising its investment strategy in a way to take more risks, especially after the change by GPIF."

"The civil service fund started working together with a private pension consultant company in June to review its portfolio model, the sources told Reuters."

"As of the end of March, the federation had invested 78.8 percent of its 7.8 trillion yen ($79.12 billion) portfolio in domestic bonds, 6.8 percent in domestic equities, 1.2 percent in foreign bonds, 5.3 percent in foreign stocks, 2.7 percent in short-term assets, 2.2 percent in real estate and 3.0 percent in loans."

Carlyle and Karita Complete Simplex Holdings TOB

SCK Holdings, a JV company equally owned by the subsidiaries of Carlyle Japan and Karita & Company, has completed the tender offer for Simplex Holding, a software and system solution provider focusing on dealing and risk management solutions for financial institutions and online brokers.

The tender offer was announced in early June and the offer proce was set at JPY 45,000 per share vs. past 3 months average of JPY 38,806 and past 6 months average of JPY 33,887.

SCK has acquired 92.65% of outstanding shares (excluding treasury stocks) for JPY 23.6 billion. According to the tender plan described in the FSA filing documents, Carlyle Japan invests JPY 6.3 billion, Simplex management team invests up to JPY 2.1 billion, Karita & Co invests approx. JPY 0.2 billion, while Mitsubishi UFJ Bank provides financing up to JPY 20.5 billion. SCK plans to acquire all outstanding shares of Simplex through 2-step acquisition process.

For FY 2012, Simplex generated net revenues and EBITDA of JPY16.6 billion and JPY2.9 billion respectively.

CLSA Sells 31.96% Of Baroque Japan to Shenzen-based Belle International and 23% to CDH

The Nikkei reported that CLSA Sunrise  Capital has agreed to sell 31.96% of Baroque Japan, Tokyo-based apparel company which owns several "109" fashion brands, to Shenzen based Belle International for approx. JPY 9.3 billion (USD 96 million).  Baroque Japan and Belle International will form a JV to expedite Baroques business development in China.

AVCJ also reported that, in addition to the sale to Belle,  another 23% has been sold to CDH at an undisclosed price. The transaction represents a full exit for CLSA, which previously held a 54.96% stake.

After  CLSA acquired 83% of Baroque in September 2007, CLSA had previously considered to list Baroque on Hong Kong Stock Exchange and sold a part of its holdings.

Fortress Buys Sheraton Hotel At Tokyo Disney

Fortress Investment Group LLC completed its acquisition of the Sheraton Grande Tokyo Bay Hotel in the Tokyo Disney Resort area for some 50 billion yen by Thursday, according to media reports.

In February 2007, Morgan Stanley Real Estate and Starwood  bought the "official Tokyo Disney Resort hotel" from Taisei Corp, Japan's leading construction company with cash and loans. The loans were then securitized, and commercial-mortgage-backed securities were sold to institutional investors.

At the Lehman crisis,  property prices plummeted and the Morgan Stanley-Starwood team gave up on rolling over loans. So the hotel's ownership was transferred to CMBS-holding creditors, who had since sought a new buyer.


Fortress is believed to be keeping the hotel's name unchanged and retaining Starwood Hotels & Resorts Worldwide Inc. as its operator. Fortress had set up a fund dedicated to Japanese assets, primarily real estate, in 2010.

Real estate transactions climbed to 2.36 trillion yen in the first six months of this year, the highest level since 2005, according to the Urban Research Institute. The first-half tally stood at 1.75 trillion yen in 2008.

Advantage Partners Divests Kazaka Securities

Kazaka Securities, a major subsidiary of Kazaka Financial Group, which is 100% owned by Advantage Partners, will be purchased by Osaka-based Naito Securities. Naito Securities has client assets worth about JPY 350 billion. The acquisition of Kazaka Securities and Kazaka's JPY 300 billion client assets will make Naito Securities one of the larger medium-size brokerages in Japan.

Advantage bought Kazaka Financial Group in December 2006 from LiveDoor, which was seeking asset divesture as part of its corporate restructuring. 

Government Pension Reportedly Contemplating Infrastructure Investments In FY 2015

The Nikkei reported yesterday that "The government has set up a panel to explore ways to diversify the GPIF's investments. Among the new ideas are funds that invest in roads, ports and other foreign infrastructure. The pension giant would only steer a few hundred billion yen in this direction at first, starting around fiscal 2015. Eventually, overseas infrastructure may make up several percent of its total holdings."

As a part of Abe government's growth strategy plan, a panel of experts was established in June under the Cabinet Secretariat. The panel is expected to compile recommendations regarding the investment management of GPIF,  3 mutual aid organizations and 100 independent administrative agencies and national public universities by November/this fall.  The assets concerned add up to JPY 200 trillion.

It was also reported today that the government would consolidate the investment policies and guidelines between the public pensions for private sector employees (Kosei Nenkin) and the pensions for public servants and school teachers (Kyosai Nenkin) in fiscal 2014. This change would cause a number of Kyosai Nenkins, which aggregately manage JPY 80 trillion, to have a portfolio similar to that of GPIF. "KKR", the mutual aid association for national public servants, currently allocates 80% of its JPY 9 trillion asset to domestic bonds - exceeding GPIF's 60%.

Shinkin Central Bank Teams Up With Mitsubishi Corp For Real Asset / Infrastructure Investments

The Shinkin Central Bank (SCB), which manages JPY 30 trillion on behalf of 271 shinkin banks across the country, and Mitsubishi Corp have announced that the two institutions will for a strategic alliance in  four business fields, which include overseas real asset / infrastructure investments.

According to the press release of Mitsubishi Corp, "Through this collaboration, SCB and MC are going to implement step-by-step investments which focus on real asset areas such as real estate, transportation/shipping and infrastructure/energy. In addition, SCB is going to support local credit unions to participate in the financial side of regional infrastructure projects as a lead arranger."

SCB has little experiences in overseas infrastructure investments. According to the Japanese press release of both companies, such "investment" could also include "lending" and the flowchart in the release hints that the target could be both "real assets" and "private equity funds".

Carlyle Files Japan Fund III With SEC

Private Equity International has reported that the "Carlyle Group has officially launched its third Japan-focused fund, registering the vehicle with the US Securities and Exchange Commission, according to a SEC filing from late July. Carlyle Japan Partners III is a Cayman Islands registered fund."

"The filing did not disclose the size of the fund. But a source close to the matter told Private Equity International it will be JPY 100 billion (€769 million; $1.02 billion). "

"CJP II is currently tracking a return multiple of 1x and net IRR of 5 percent, the firm said at its fourth quarter earnings call in February. Carlyle Japan Partners I, a 2001 vintage fund that is fully invested, posted a multiple of invested capital of 2.8x and net IRR of 37 percent."

"In Japan, Carlyle looks at businesses worth $100 million to $150 million but avoids big auction deals and investments in companies with more than 1,000 employees, Tamotsu Adachi, managing director of the Carlyle Group in Japan, told PEI in an earlier interview."

Ashikaga Holdings Plans IPO

Ashikaga Holdings Co., the parent firm of Ashikaga Bank, has applied to go public by listing its shares on the Tokyo Stock Exchange, according to The Nikkei.

Ashikaga Holdings' board has begun preliminary talks with the TSE, its shareholders and the Financial Services Agency.

Ashikaga Bank collapsed in 2003 and was delisted soon afterward. The regional bank was temporarily placed under state control before being sold in 2008 to a group of investors led by Next Capital Partners and Nomura Financial Partners.

Ashikaga Holdings, which was founded in 2008, initially planned to go public in the fiscal year ended in March 2011, but it has delayed the listing due to fallout from the global financial crisis that erupted in autumn 2008 and the Great East Japan Earthquake of March 2011.

ORIX Completes Acquisition Of Robeco

On July 1, ORIX Corporation (ORIX), Coöperatieve Centrale Raiffeisen-Boerenleenbank B.A., (Rabobank) and Robeco Groep N.V. (Robeco) announced that the acquisition of Robeco by ORIX has been completed. ORIX has acquired approximately 90.01% of the equity in Robeco from Rabobank. The total sale price as a result of adjustment to reflect Robeco’s most recent financial position was 1,937 million EUR (250.7 billion JPY). The acquisition was previously announced on February 19th, 2013.

Nippon Mirai Has Divested Aquaintec to Nihon-Kaisui

Nippon Mirai Capital has agreed to sell 100% of the oustanding shares of Aquaintec Corp, formerly Asahi Tech Environmental Solutions Corp, to Nihon-Kasisui Co., a subsidiary of Air Water Inc., on July 1st. Aquaintec specializes in water utility renovations, whereas Nihon-Kaisui, meaning Japan sea water, has been developing water treatment and soil cleansing business based on its expertise accumulated through salt production from sea water.

Nippon Mirai had bought 100% of Aquaintec reportedly for JPY 2.4 billion in November 2010.

Air Water Inc., the parent company of Nihon-Kaisui, has been actively acquiring PE portfolio companies. In addition to Aquaintec, it purchased Nihon-Kaisui from Advantage Partners in 2007 and Goldpak, soft-drink producer, from i-Sigma Capital in 2012.

90% Of Corporate Heads See Japanese Economy Growing, 80% See Consumption Picking Up

According to a Nikkei survey, which was conducted June 5-21, "a total of 90.5% of the heads of 148 major Japanese companies say the economy is growing, far more than the 68.2% recorded in March", and "those who thought personal consumption had picked up from six months earlier or was starting to pick up stood at 80.4%, a sharp climb from 51.4% in the previous survey. Looking to the future, roughly 80% said both personal consumption and the economy would be improved or showing signs of improvement three months later."The 90.5% figure "even topped the 79.3% logged in October 2007, before the eruption of the global financial crisis."

"A total of 5.4% of the respondents said the economy was growing smoothly, while 85.1% said it was expanding, but slowly. Those who felt it was leveling off shrank to 9.5% from the previous 31.1%. No one said the economy was weakening."

"Although the stock market saw a series of volatile swings and the yen moved back to a strengthening trend while the survey was being conducted, the corporate chiefs were overwhelmingly optimistic."

"When asked about their investment plans, most executives said they wanted to invest for growth, with 62.2% specifying capital investment, 42.6% M&As and 35.1% R&D. Only 31.8% said they wanted to spend money on restoring their financial standing, such as by reducing their debt."

CLSA's 2nd Japan Fund Buys A Car Auction Company

CLSA has purchased all outstanding shares of BCN, a Saitama-based B2B car auction site operator, from its parent, Chubu Motor Sales Co. BCN acts as a dealing platform between professional sellers and buyers, both are registered members of BCN and pay commissions to BCN. It conducts 130,000 auctions per year, of which 63% are sold.

CLSA's second Japan fund, Sunrise Capital II is currently under fund raising and the transaction marks its first investments after the first close. 

Newly-Setup Government Panel To Reform Investment Allocation Policy Of Public Pensions, Agencies and Universities

According to Nikkei, the government plans to retool investment strategies for the roughly JPY 200 trillion (USD 2 trillion) in assets held by 190 public institutions, including USD 1.2 trillion Government Pension Investment Fund,  three mutual aid organizations as well as 100 independent administrative agencies and national public universities, by the end of fiscal 2015 in a shift away from the current emphasis on bonds. This would mark the government's first across-the-board review of public pensions' asset management practices, taking into consideration the size and characteristics of each entity.

A panel of experts, to be launched as early as this month under the Cabinet Secretariat, will compile recommendations this fall. The plans will be presented tomorrow as a growth strategy pillar.

The panel of experts will discuss such changes as raising GPIF's stock weighting, as well as expanding holdings to include real estate investment trusts, commodities futures and unlisted shares. GPIF draws down around 4-6 trillion yen annually from reserves to cover growing pension benefit payouts, adding pressure on it to boost investment performance.The government will also consider other changes, such as adding more investment specialists at GPIF, which now has about 70 staff members.

CPPIB & GE Capital Real Estate Form USD 400 million Tokyo Office JV

Canada Pension Plan Investment Board (CPPIB) and  GE Capital Real Estate (GECRE) have announced a co-investment program to invest in central Tokyo office properties (May 8). According to the joint press release by CPPI and GECRE:

Canada Pension Plan Investment Board (CPPIB) and GE Capital Real Estate (GECRE) announced today the recent formation of the Tokyo Office Venture (TOV) targeting investment in mid-size Class A-B offices in key Central Business District sub-markets.

CPPIB and GECRE will initially invest a combined equity amount of up to JPY40 billion (US$403 million) in this new venture on a 49%/51% basis respectively. The TOV program will focus on core- plus and value-add opportunities.

This venture will leverage the locally-based origination, underwriting, asset management and leasing teams of GE Japan Corporation, a wholly-owned subsidiary of General Electric Capital Corporation.

Graeme Eadie, Senior Vice-President and Head of Real Estate Investments, CPPIB, said: “This opportunity provides us with an attractive entry point to the Tokyo office sector and supports our strategy to expand our real estate portfolio in Asia. We look forward to partnering with GECRE, one of the world’s premier real estate lessors with a proven track record in Japan.”

François Trausch, President of GE Capital Real Estate Asia Pacific, said: “By combining GE Capital’s deep domain expertise in Japan with CPPIB’s global investment reach, this co-investment program aims to bring two large real estate players together to tap the current opportunities of the office market in Tokyo. We are pleased to have CPPIB as a partner and look forward to working together as we ramp-up our sourcing activities to identify compelling commercial real estate opportunities that will generate attractive risk-adjusted returns for the TOV program.”

GE Capital Real Estate has been actively originating and managing real estate properties in Japan since 1998, and has acquired over US$6.9 billion office assets over that time.

According to PERE, a CPPIB spokeswoman said that the financial crisis has had a “disproportionate impact on the Tokyo office market,” and the firm’s research suggests that the cycle has been bottoming out over the past few months. Thus, the firm believes Tokyo’s office market “offers attractive pricing dynamics, deal access and potential for outperformance.”  PERE also "understands that its total investment capacity is around $1.2 billion."

This is CPPIB’s second joint venture in Japan, following its $1.132 billion JV with Global Logistic Properties.

Another Fraud Case - MRI International

Japan's Securities and Exchange Surveillance Commission is investigating an American financial firm, called  MRI International Inc, touting high-return medical-claims-backed investment products over the possible disappearance of JPY 100 billion (US 1 billion) clients' money.

The SESC suspects MRI International of faking performance reports and will call on the Financial Services Agency to take administrative action. The FSA is expected to immediately order the firm to suspend operations.

Las Vegas-based MRI International sells its investment products in Japan, advertising annual returns of 6% to 8.5%. It claims to have collected JPY 136.5 billion in investments from about 8,700 Japanese retail investors.

Diamond Realty To Set Up Real Estate Debt Funds

Mitsubishi Corp. (8058) 's wholly owned subsidiary Diamond Realty Management Inc. will set up an 11.3 billion yen private real estate mezzanine loan fund backed by eight investors, including a domestic pension fund, life insurer and regional bank.
The fund will invest in the mezzanine debt of large rental condominiums in Tokyo and commercial buildings in the city's Ginza and Ometesando districts. The fund is projected to yield a 5-6% annual return to attract institutional investors looking for alternatives to government bonds. Mitsubishi also plans to establish a second fund of 15-20 billion yen later this fiscal year.

List of High Multiple Exits In Japan

Private Equity International has reported several high multiple exits in Japan buyouts in its recent articles. To sum up;

1. Advantage   Komeda Coffee 7x 2013   Secondary sale
2. Advantage Community One      22x 2013   Trade sale
3. Bain Sun Telephone 8x 2012   Trade sale
4. J-Star Iki Iki 8x 2012    Trade sale
5. Unison Akindo Sushiro 8x 2012    Secondary sale 
6. KKR               Intelligence                5x  2013    Trade Sale 

In fact, the above list should also include CLSA's Ever Life exit in January 2013.

Cerberus To Increase Its Holdings in Seibu Against Seibu's Opposition

Early last month, Cerberus Capital Management announced a tender offer to raise its stake in Seibu Holdings Inc. to more than one-third, which would allow the U.S. fund to veto major board proposals at the railway and hotel operator's upcoming shareholders meeting.

Cerberus currently owns slightly more than 32% of Seibu. The tender offer, announced March 11, stands to acquire additional 4% to raise the fund's stake to 36.44%. Now the US fund plans to lift the purchase target to around 10%.

The offer runs from March 12 through May 17, with the offer price set at JPY 1,400 per share. That represents a roughly 190% premium over Seibu's closing price of 485 yen in December 2004, when Seibu Railway, its core subsidiary, was taken off the TSE. To acquire additional 10% at JPY 1,400 per share, Cerberus will be spending JPY 48 billion yen ($500 million). 

Seibu remains opposed to the move, and has garnered support from Mizuho Corporate Bank and some other large shareholders. 

Cerberus and Seibu have been under dispute over Seibu's plan to relist on the Tokyo Stock Exchange. 

Seibu was delisted in 2004 for falsifying financial statements. Seibu filed a relisting application with the TSE by last October, but no action has been taken due to disagreements with Cerberus over the timing and pricing of the initial public offering.

It was also reported that Cerberus intends to propose 8 new board members, including current chairman and former U.S. vice president Dan Quayle, and former U.S. Treasury Secretary John W. Snow, also a Cerberus senior executive, in addition to Hirofumi Gomi, a former commissioner of the Financial Services Agency; Masaharu Ikuta, previously head of what is now Japan Post Holdings Co.; and Yuji Shirakawa, a director at Aozora Bank.

Although Seibu is unlisted, it is owned by many investors. As a result, the financial instruments and exchange law requires Cerberus to use a tender offer to increase its stake above one-third.

The acquisition may result in the first major hostile TOB in the history of Japanese private equity.  

Polaris Capital Acquires Socie World From Citigroup Capital Partners Japan

Polaris Capital Group has announced teh acquisition of Socie World Co., Ltd. through its 3rd fund (1 April 2013), which has raised JPY 36 billion so far.

According to its press release, "Polaris Private Equity Fund III .... completed the acquisition of close to 100% of the issued shares of Socie World Co. Ltd from the current shareholders including Citigroup Capital Partners Japan Ltd.""Socie World operates aesthetic salons, hair salons and sports clubs for middle to high-end customers." "Socie World have opened its aesthetic salons in high-class department stores and luxury hotels and as a result secured a very solid business franchise.""On the overseas front, Socie World .... succeeded in establishing a strong franchise in Taiwan. By applying the success formula in Taiwan to other markets in Asia including China, Socie World should be able to achieve a mid to long-term growth."

According to Nikkei,  the amount invested by Polaris was JPY 3 billion.

PEI Awards: J-Star is chosen as "Firm Of The Year In Japan", while Sushiro Gave Unison "Exit Of The Year In Asia".

J-Star is awarded "PEI Firm Of The Year In Japan", beating Bain Capital and The Longreach Group. PEI writes:

The big story in Japan in 2012 was the small-cap market, with 77 percent of deals under $125 million, according to Brightrust PE Japan figures. J-Star snatched the plaudits from industry giant Bain Capital as the leading firm in this arena – and with good reason. The firm has had two impressive exits in a depressed market (a source close to the firm described the exits as 8x and 3.4x), both to strategic buyers.The seven-person firm also bought a controlling stake inThree Arrows, a small pet products supplier, for under $125 million. Gregory Hara, president and chief executive of J-Star, likes to call the firm’s investments “solution capital”, because they focus on issues within the company that private equity can fix. He believes J-Star’s reputation in the insular small-cap market has made all the difference.The firm also believes it’s well- positioned to help Japanese companies expand offshore: a January 2013 exit involved a Japan-China business.


Unison Capital is chosen as "PEI Exit Of The Year In Asia" with Sushiro. According to the PEI article:

A lack of deals and low returns in Japan have disappointed investors. But Unison Capital’s 2012 exit of Akindo Sushiro, a sushi restaurant chain that it sold to UK-based Permira for $1 billion, may give some pause for thought. Unison’s sale yielded an 8x exit multiple, says Tatsuo Kawasaki, Unison co- founder and partner. Operational work played a key role. Over a five-year holding period, EBITDA increased from 4 billion to 10 billion yen (€84 million; $113 million), purely from organic growth, he adds. “The management pushed forth with growth and profitability initiatives and these came to fruition in light of the fact that the Japanese economy at best is going sideways,” Kawasaki says.
In the last 13 months, Unison also made five acquisitions, four in Japan and one in Korea, which came from Fund III (vintage 2008). In 2013, the firm intends to raise a new Japan-focused fund, suggesting that the country, at least for Unison, is living up to expectations.

Japan's Orix Buys 90.1% of Robeco

Orix Corp. (8591) has agreed to buy approx. 90.1% of Netherlands asset manager Robeco from Rabobank for EUR1.935 billion (JPY 241 billion). This is the largest acquisition ever by Orix, Japan's biggest financial services and leasing company. Orix will allocate EUR 150 million treasury stocks to Rabobank as part of the acquisition price, and as a result Rabobank becomes a shareholder of Orix.

Rabobank will retain the remaining 9.99% stake in Robeco and will continue "to cooperate in maintaining and expanding Robeco’s business platform", according to the press release.

Robeco was founded in 1929. It had EUR189 billion in assets under management at the end of last year, a 26% increase from 2011.  The asset management firm has about 1,507 employees and has strong customer bases in Europe and the U.S. Traditional and alternative products of Robeco and its subsidiaries, SAM and TransTrend, have been invested by Japanese institutional investors and retail investors via major local securities firms.

Orix, which listed on the New York Stock Exchange in 1998 and which is more than 50% foreign-held, also operates in investment banking, life insurance, venture capital and in the financing of real-estate development.

CLSA Japan Sells Everlife To LG Household & Health Care

CLSA Sunrise Capital Partners I, a 2006 -vintage Japan-focused fund with USD 350 million commitment, sold 100% shares of  Everlife Co. Ltd. to LG Housefholld and Health Care for JPY 25.8 billion (USD 285 million).

According to IR documents of  LG Household and Health Care, the sale and purchase agreement was concluded on 17 December 2012 and the transaction was completed in late January. Everlife, 3rd largest direct marketing company in Japan's health care sector after Suntory and DHC, was valued at JPY 37 billion (USD 410 million), or 6 times estimated 2013 EBITDA.

CLSA Japan invested in Everlife in February 2008, but still managed to generate a generous return.

CLSA Japan also announced the first closing of its second fund with USD 150 million commitments form its existing foreign LPs.

CITIC Japan's Tri-Wall Eyes Russia And Turkey

Tri-Wall, a maker of heavy-duty cardboard and a portfolio company of CITIC Japan Capital Partners II,  has acquired DS Smith Plc's special cardboard business. Based in the UK, DS Smith sells its products to car parts makers across Europe. Tri-Wall, which has focused on Asian market to date, now aims to expand its business into Russia and Turkey. With the addition of 1.3 million sq. meters production capacity by the acquisition, Tri-Wall's capacity increases to 3.0 million sq. meters.

USD 78 Billion Record Trade Deficit in 2012

Japan posted a record annual trade deficit of JPY 6.927 trillion (USD 78 billion) in 2012, according to Finance Ministry figures released Thursday. The largest gap between exports and imports in history was last recorded in 1980 during the"second oil crisis". The new record deficit is partly due to a sharp rise in the imports of fossil-fuel, particularly liquefied natural gas, for thermal power projects. 

The balance of trade in goods for December, released simultaneously by the ministry, came to JPY 641.5 billion (USD 7.1 billion) in deficit, mainly reflecting weak exports and rising imports.

Taiwan's Chinatrust to Buy Tokyo Star Bank

The Nikkei reported that Taiwan's Chinatrust Commercial Bank made an official proposal to acquire Tokyo Star Bank to shareholders for JPY 50 billion (USD 555 million) earlier in the month. Most of the shareholders - including U.S. investment fund Lone Star Funds, Shinsei Bank and France's Credit Agricole SA - are believed to have indicated their support for the bid.

Pending a final agreement with shareholders, the deal will be reviewed by the Financial Services Agency. The FSA will check whether the Taiwanese bank meets necessary ownership conditions under the Banking Act. The deal will make Chinatrust the first foreign bank to acquire a Japanese bank. Previous foreign takeovers of Japanese banks mainly involved investment funds.

Tokyo Star Bank was previously owned by Lone Star, who bought its predecessor Tokyo Sowa Bank in 2001. Loan Star listed the regional bank on Tokyo Stock Exchange in 2005, and subsequently sold its remaining holdings to Advantage Partners. Advantage bought 100% of the bank through take-private TOB in early 2008. In 2011 Advantage was forced to transfer the bank's entire shares to the lender consortium, which included Loan Star and other current shareholders.

Government / BOJ Joint Statement Sets 2% Inflation Target

The Japanese government and the Bank of Japan issued a joint statement to set an inflation target of 2%  today. The central bank also decided to resort to a new method of open-ended monetary easing to pump more money into the economy. The move was largely expected after Prime Minister Shinzo Abe took office last month, but it still denotes a very significant change in the historical relationship between the Government and the BOJ.

The joint statement issued today is binding for both the government and the BOJ. While the BOJ has agreed to try to hit the 2% inflation target as quickly as possible, rather than over the medium to long term, the government has also promised to introduce measures to raise the international competitiveness of Japanese industry and to encourage investment by means of deregulation.

Norinchukin Bank To Support Agri-Corporations

Norinchukin Bank will launch a JPY 100 billion (USD 1.1 billion)  loan program to support large agricultural corporations in this April. The program is aimed at promoting regional development and enhancing the overseas competitiveness of Japanese agricultural products. It is the bank's first such undertaking for the farm sector.

 The farmers' bank will also establish a JPY 5 billion (USD 56 million) fund to invest in about 100 corporations trying to obtain farmland or establish new businesses, providing an average of 50 million yen to each.

The initiative is not very significant given the size of the bank, but it is the first major  attempt to support  agricultural "corporations", to which the bank has traditionally kept some distance in order to favor agricultural "co-operatives" and their member individual farmers.