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.