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.