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.