INCJ to Invest JPY 10 Billion in Lithium Ion Battery JV

The Innovation Network Corp. of Japan will invest JPY 10 billion (USD 125 million) in a joint venture with Kureha Corp. (4023), Kuraray Co. (3405) and Itochu Corp. (8001) to mass-produce a cutting-edge lithium ion battery material at home and abroad. The 3 strategic partners will jointly contribute JPY 10 billion to the JV. Kureha and Kuraray have established processes to produce plant-derived material to be used in battery electrodes that can halve the time required to charge electric and plug-in hybrid vehicles, as well as improve battery durability by as much as 30%.

Polaris III First Close with JPY 20 Billion

Polaris Capital Group has announced that its 3rd fund had the first closing on July 11th with approximately JPY 20 billion (USD 250 million) commitments from investors. Polaris III aims to raise between JPY 30 to 40 billion. According to the press release, Polaris I has realized almost two-thirds of investments and expects to achieve full exits in a couple of months. Polaris II is now fully invested.

http://www.polaris-cg.com/topics/20120730-E.pdf

Polaris to Acquire a 30% Stake in Myland

Polaris Capital Group will acquire a 30% stake in Myland Real Estate Co. by investing in slightly over JPY 2 billion (USD 25 million) through a private placement. Myland buys existing homes, renovates and sells them to first-time home buyers. It has agencies in 46 of Japan's 47 prefectures and takes in about JPY 30 billion (USD 375 million) in annual sales. According to the Nikkei report, Myland aims to go public in a few years working with Polaris. Myland is the 3rd investment for Polaris in the past 12 months, while it sold the holdings in 3 other portfolio companies during the same period.

Defta Partners to Establish a Japan-focused VC Fund

Defta Partners will establish a VC fund focusing on telecom, healthcare, environments and energy sectors through its Japanese subsidiary, Defta Capital. The fund size will be between JPY 2 - 3 billion (USD 25 - 37 million). Defta Capital will be moving its HQ from to Tokyo to Yokohama in Kanagawa Pref.  Kanagawa Pref. has been implementing policy measures to support venture companies to facilitate their growth.

Japan Buyout Monthly June 2012

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FT: Corporate Japan Back on Track

A good summary of overseas M&As by Japanese corporations - historical and current - by FT.

http://on.ft.com/LH7Dq1

Open Door To Foreign Property Acquisitions By Japanese REITs

A bill to allow to Japanese listed REITs to own a majority stake of foreign real estate special-purpose companies will be submitted to the Diet next year. Currently REITs cannot own majority stakes in firms. The revisions would make an exception for overseas SPCs, which would practically open the door to foreign property acquisitions by Japanese REITs. Japanese REITs' total market capitalization has shrunk to around 3.5 trillion yen (44 billion dollars) , down from nearly 7 trillion yen (88 billion dollars) in 2007.

Unison And RJH Prepare For Exits

According to Mergermarket, Unison Capital is in the process of divesting Akindo Sushiro and UCOM and RJH is looking for a buyer for its portfolio company, Shaklee Japan.
Unison invested in Akindo Sushiro in September 2007 and took the operator of conveyor belt sushi chains private through TOB in 2008. Unison invested in UCOM, an operator of fiber-optic communications, in Mar 2007 and have done a few add-on investments. RJH bought Shaklee Japan in 2004.

Japan to Set Up A Fund To Support PFI Projects

A bill to establish a government-sponsored fund that will invest in, or lend to, PFI projects in renewable energy and infrastructure is being discussed at the Japanese diet. Once the bill is approved, the Government will seed the fund with 5 billion yen (60 million dollars) and invite private companies to add up capital. Going forward, the Government will provide loan guarantees and additional capital to enable the fund to cope with much larger financing requirements. This fund could have a similar structure as Innovation Network Corporation of Japan, which now has as much as 24 billion dollar investment capacity. According to a press, the Ministry of Land, Infrastructure, Transport and Tourism plans to sell management rights of Japanese airports, such as Sendai and Kansai.

INCJ to Buy 42% of Nistica from Fujikura

The Innovation Network of Corporation of Japan (INCJ) announced that it will acquire 42% of Nistica, a US-based company that supplies wavelength selective switches to network equipment manufacturers, from Fujikura Ltd. Fujikura has been investing in Nistica since 2007 and had acquired the majority in April 2012. Fujikura will continue its 52% ownership alongside with INCJ (42%) and NTT Electronics Corp (6%).  The transaction value was not disclosed.

Consolidation In Consumer Electronics Retailer Industry

Yamada Denki Co., Japan's top consumer electronics retailer, will acquire its smaller peer Best Denki Co.. This will lift its annual sales above 2 trillion yen (25 billion dollars). Best Denki, now the No. 8 player, once led the industry, but the acquisition of Sakuraya Co. in 2006 and other missteps have led to its decline.
Bic Camera Inc. just last month converted 7th-ranked Kojima Co. into a subsidiary and rose to the 2nd-biggest consumer electronics retailer in Japan from its previous perch at No. 5. This has left Best Denki looking for a new partner in the increasingly competitive market.

Japan's May Current Account Surplus Narrowed

Japan's current account surplus was 215.1 billion yen in May. It narrowed 62.6% from a year earlier and was much smaller than economists expectation of 511 billion yen. The trade and service balance posted a deficit of 941 billion yen (yes, Japan's trade balance has been in deficit since 2011) as the result of increased LNG imports and decreased exports to Europe. Income surplus, though fell by 11.7% to 1, 274 billion yen, still more than offsets trade balance deficit.

Mori Trust President To Set Up An Investment Company

Nikkei reported that Mori Trust president, Mr. Mori, will set up an investment company which will invest in Japanese and non-Japanese companies to help them expand business locally and globally. Mr. Mori will capitalize the company with 16 billion yen (USD 200 million). Not much details are available at this point.

Goldman To Launch A Private REIT Targeting At JPY 300 Billion

According to a Bloomberg report, Goldman Sachs Group Inc. plans to expand its new private real estate investment trust to as much as 300 billion yen ($3.7 billion) to buy Japanese properties, as it foresees a turnaround in prices. GS aims to launch a private REIT, a product recently introduced in Japan, with the initial target of 30 billion yen in this August. Mitsubishi Estate Co., Mitsui Fudosan Co. and Nomura Real Estate Holdings Inc. have set up private REITs in the past 12 months. According to a Hong Kong-based S&P professional cited in the Bloomberg article, “Japan is in a different cycle compared with other markets in Asia-Pacific.The other markets are coming off from a cyclical top so they are well under way for correction. Japan has been in correction for some time now, so it’s on its way for a recovery.”

J-REITs account for 8.3 trillion yen of Japan’s 23.2 trillion real estate investment market, while private equity real estate funds represents the rest ( =15 trillion yen). The size of private REIT market, however, is estimated to be less than $2 billion.


Japan’s $3.36 trillion in pension money is the world’s second-largest after the US. According to Towers Watson, Japanese pensions have 31 percent of investments in equities and 59 percent in bonds, with only 6 percent in alternative assets.

Tokyo / Osaka Stock Exchange Merger To Be Approved

The Japan Fair Trade Commission will give the go-ahead to the planned merger between Tokyo Stock Exchange Group Inc. and Osaka Securities Exchange Co. (8697). The commission is expected to officially approve the merger sometime this week. The TSE will launch a tender offer for the OSE as soon as the announcement is made. The merger will be completed by next January with the creation of a holding company. The combined exchange will be the 3rd largest exchange in terms of the aggregate market capitalization of the companies listed.

BOJ Sees Economy Improving in All 9 Regions in Japan

The Bank of Japan upgraded its assessment of all nine economic regions in Japan in July. This was the first time since October 2009 that all regions have been upgraded in the bank's quarterly Regional Economic Report. The report was released at a meeting of managers from the central bank's 32 domestic branches and general managers based in the U.S. and Europe.

The BOJ sees the nation's economy recovering steadily on the back of domestic demand. Most regions see a mild recovery or pickup in the economy. Seven regions see consumption increasing or picking up, while eight regions noted a rise or pick up in capital spending.

Tokyo Metropolitan Government to Back VC Investments

Tokyo Metropolitan Government has appointed Daiwa Corporate Investment to manage Tokyo Metropolitan Government backed VC fund. Tokyo will provide JPY 2 billion (USD 25 million) to seed the fund. The fund will provide risk capital to prospective venture companies in such areas as energy, environments, semiconductors and electrical parts.

INCJ Tops Up Capital

Innovation Network Corporation of Japan (INCJ) has increased its capital base by allocating shares to 8 Japanese companies - Cannon, Sony, Toyota, Marubeni, Sumitomo Mitsui Bank, Mitsubishi Chemical, Mitsusbishi Heavy Industries and Mitsubishi Corp with JPY 500 million each totaling to JPY 4 billion (USD 50 million). While this brings INCJ's private sector shareholder ownership to JPY 13 billion (USD 160 million) by 26 companies, it merely accounts for 8.3 % of its total capitalization. The Government has been continuously adding capital to INCJ and it is now reaching USD 1.8 billion. As the result, the private sector ownership has been on decline, obscuring INCJ's position as a public-private entity. Considering its total investable capital of over USD 20 billion, which is made available to INCJ through the Government guaranteed loans, the USD 50 million share allotment is nothing but a symbolic act.

Japan's Overseas M&As Hit Record High in H1 2012

The number of overseas M&As by Japanese businesses in the first 6 months of 2012 rose by 15% from H1 2011 to 262, topping the previous record of 247 in 1990. The M&A deals totaled JPY 3.49 trillion (USD 44 billion), up 9% from a year earlier. The tally is the second highest after the 4.46 trillion yen in H1 2006, according to M&A advisory firm Recof Corp.

The first half of this year featured large-scale acquisitions by trading houses. Mitsubishi Corp. paid JPY 230 billion (USD 2.9 billion) to acquire concession rights to a natural gas field in Canada. Marubeni Corp. purchased major U.S. grain firm Gavilon LLC for roughly JPY 300 billion (USD 3.8 billion).

Mid-tier regional companies also acquired foreign companies as well. Taiho Kogyo Co. acquired the No. 1 Chinese aluminum bearing maker, while Chubu Yakuhin Co., a drugstore chain operator obtained a stake in a Chinese drugstore company. In addition, smaller firms also appear to have acquired overseas businesses to follow their customers' moves. Of the M&As with disclosed price tags, small deals worth less than JPY 1 billion (USD 12million) accounted for nearly 40%.