GPIF Said Major Launch Of Alternative Investment Program In 2016

In an interview with the CEO and CIO of GPIF, Nikkei reported today:
    
 CIO Hiromichi Mizuno, in his first interview with a Japanese media outlet since taking office in January, indicated that the GPIF will step up investment in alternative assets.

     The fund will increase real estate, infrastructure and unlisted stocks to as much as 5% of total assets. "We are hiring and will assign four or so managers to each" category, Mizuno said.

     With its current quarters increasingly cramped, the GPIF will relocate to a bigger office in Tokyo's Minato Ward. The new alternative-asset investment team will be ready to roll after the move and get into full swing as soon as next year.

     But Mitani noted that the fund is not ready to aggressively increase investment in such assets, citing the costs involved. Assets like real estate must be securitized rather than simply purchased by the GPIF, so the complexity of the process adds commission costs.

MBK Auctions Tasaki

MBK Partners is reportedly soliciting first-round bids to divest its portfolio company, Tasaki.

Tasaki is known for its pearl and generally seen as the No.2 perl jewerler after Mikimoto.

MBK Partner invested JPY 7 billion in Tasaki in the form of preferred shares in October 2008, when Global Financial crisis was erupting. However, Tasaki's profit had fallen into red a few years before the GFC and, by late 2008,  its share price was already a small fraction of its 2006 peak. Nonetheless, the share price further plunged and it took 4 years for MBK to make Tasaki marginally profitable. It was only in the last FY (ending Oct 2014) that Tasaki was able to report JPY 1.5 billion operating profit. For the first quarter of FY 2015, Tasaki reported JPY 0.7 billion net income.

According to the Bloomberg report, "The sale may fetch more than 25 billion yen ($202 million)" and "Chow Tai Fook Jewellery Group Ltd., the world’s largest listed jeweler, is among companies weighing offers."

If all the preferred shares are converted into common shares, MBK's ownership will increase from the 49% to 79%. Apparently with virtually no net debt, if the company is sold at JPY 25 billion, Tasaki deal could bring a 2.5-3x return to MBK's first fund.

CLSA Announces 2 New Investments

CLSA Capital Partners has announced 2 new investments in about a week for its Sunrise II Fund.

On may 15th, CLSA completed a share acquisition of Asamiya Co., Ltd.,  a low-cost food and beverage manufacturer based in Osaka. Asamiya was founded in 1951 and its product range includes food and beverages such as mineral and sparkling water, canned coffee, ice, soy sauce, and instant ramen noodles.  Asamiya’s consolidated sales in fiscal year ending March 2014 was approximately JPY14 billion（USD 117 million) and has approximately 600 employees. The founder family will retain some shares and continue to run the company.

Today, CLSA announced that Sunrise II has acquired a stake in Worldtool Co., Ltd.,  a wholesaler and retailer of automotive tools. Worldtool was founded in 1995 by the current CEO, who will remain at the helm of the company. Worldtool operates nearly 140 retail stores nationwide under the store name “Astro Products”. Worldtool has approximately 730 employees and its sales in fiscal year ending July 2014 were approximately JPY6 billion (USD 50 million).

Sunrise II announced its final closing in October 2014 with approx. USD 210 million commitments. It aims to build a more diversified portfolio than its predecessor Sunrise I and now has 4 portfolio companies.

GPIF Issues RFP For The Selection Of Trust Banks for Private Asset Investments

Japan's Government Pension Investment Fund today announced a RFP for the selection of (a) trust bank(s) that will act as the custodian and administrator of GPIF's intended investments in private assets, such as private equity, infrastructure and real estates.

http://www.gpif.go.jp/topics/2015/0403.html (in Japanese only)

The candidates should have the trust bank license and regulated in Japan. They will include Japanese trust banks as well as trust bank subsidiaries of foreign financial institutions.

The deadline for proposal submission is April 24th.
 

Bain Takes Private Japan Wind Development Together With Its President

It was reported that Bain Capital plans to acquire Japan Wind Development, Japan's third-largest wind power company listed on Tokyo Stock Exchange, through a tender offer.  Bain will establish a company jointly with the current president of the target company each owning equal voting rights and the company will offer 580 yen ($4.76) for each of Japan Wind Development's shares, a 30% premium over the average share price of the last 3 months. If all outstanding shares are acquired , it will cost JPY 9.7 billion (USD 80 million).

Japan Wind Development has approx. JPY 40 billion liability. According to the filing documents, the company expects refinancing of its debt and hopes Bain's participation will help enhance its credit.

Last year, the Financial Services Agency ordered Japan Wind to pay fines for accounting irregularities. The company has since filed a suit, seeking to repeal the decision.

An outsider would wonder if Bain should have insisted on the majority ownership of the company in this transaction.