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.

USD 78 Billion Record Trade Deficit in 2012

Japan posted a record annual trade deficit of JPY 6.927 trillion (USD 78 billion) in 2012, according to Finance Ministry figures released Thursday. The largest gap between exports and imports in history was last recorded in 1980 during the"second oil crisis". The new record deficit is partly due to a sharp rise in the imports of fossil-fuel, particularly liquefied natural gas, for thermal power projects. 

The balance of trade in goods for December, released simultaneously by the ministry, came to JPY 641.5 billion (USD 7.1 billion) in deficit, mainly reflecting weak exports and rising imports.

Taiwan's Chinatrust to Buy Tokyo Star Bank

The Nikkei reported that Taiwan's Chinatrust Commercial Bank made an official proposal to acquire Tokyo Star Bank to shareholders for JPY 50 billion (USD 555 million) earlier in the month. Most of the shareholders - including U.S. investment fund Lone Star Funds, Shinsei Bank and France's Credit Agricole SA - are believed to have indicated their support for the bid.

Pending a final agreement with shareholders, the deal will be reviewed by the Financial Services Agency. The FSA will check whether the Taiwanese bank meets necessary ownership conditions under the Banking Act. The deal will make Chinatrust the first foreign bank to acquire a Japanese bank. Previous foreign takeovers of Japanese banks mainly involved investment funds.

Tokyo Star Bank was previously owned by Lone Star, who bought its predecessor Tokyo Sowa Bank in 2001. Loan Star listed the regional bank on Tokyo Stock Exchange in 2005, and subsequently sold its remaining holdings to Advantage Partners. Advantage bought 100% of the bank through take-private TOB in early 2008. In 2011 Advantage was forced to transfer the bank's entire shares to the lender consortium, which included Loan Star and other current shareholders.

Government / BOJ Joint Statement Sets 2% Inflation Target

The Japanese government and the Bank of Japan issued a joint statement to set an inflation target of 2%  today. The central bank also decided to resort to a new method of open-ended monetary easing to pump more money into the economy. The move was largely expected after Prime Minister Shinzo Abe took office last month, but it still denotes a very significant change in the historical relationship between the Government and the BOJ.

The joint statement issued today is binding for both the government and the BOJ. While the BOJ has agreed to try to hit the 2% inflation target as quickly as possible, rather than over the medium to long term, the government has also promised to introduce measures to raise the international competitiveness of Japanese industry and to encourage investment by means of deregulation.

Norinchukin Bank To Support Agri-Corporations

Norinchukin Bank will launch a JPY 100 billion (USD 1.1 billion)  loan program to support large agricultural corporations in this April. The program is aimed at promoting regional development and enhancing the overseas competitiveness of Japanese agricultural products. It is the bank's first such undertaking for the farm sector.

 The farmers' bank will also establish a JPY 5 billion (USD 56 million) fund to invest in about 100 corporations trying to obtain farmland or establish new businesses, providing an average of 50 million yen to each.

The initiative is not very significant given the size of the bank, but it is the first major  attempt to support  agricultural "corporations", to which the bank has traditionally kept some distance in order to favor agricultural "co-operatives" and their member individual farmers.

Carlyle Divests Qualicaps And Chimney

Carlyle has announced that it has agreed to sell its entire shareholdings in Qualicaps (Nara, Japan) to Mitsubishi Chemical Holdings (4188). Qualicaps is the largest provider of pharmaceutical capsules in Japan and is the second largest in the global high quality capsule markets, which has an estimated size of USD 1.2 billion with single-digit growth in recent years.

According to Mitsubishi Chemical, Qualicaps was valued at JPY 55.8 billion (USD 656 million) (inclusive of debts). The revenue of Qualicaps is estimated at JPY 19 billion (USD 230million) in 2012. Qualicapse CEO said, "During Carlyle’s ownership, our revenue and EBITDA increased by more than 50% and 120% respectively.." The transaction is expected to close in March 2013.
Carlyle acquired Qualicaps from Shionogi (4507) in October 2005 reportedly for JPY 20-25 billion (USD 235-300 million).

10 days ago,  Carlyle also announced that its majority-owned restaurant operator, Chimney, relisted by making a public stock offering on the Tokyo Stock Exchange Second Section on December 14, 2012 and that Carlyle would sell shareholdings in the company equivalent to around 53% of total shares issued.

In December 2009, Carlyle sponsored Chimney's MBO and acquired a 87.56% of the company for JPY 19.4 billion (USD 228 Million) of which JPY 8.6 billion was financed by debts.

INCJ And Japan Consortium To Acquire 75% Of Renesas

On December 10th, the Innovation Network Corp. of Japan announced that INCJ and the consortium of 8 leading japanese companies will acquire 75% of Renesas Electronics Corp  (6723) for JPY 150 billion (USD 1.79 billion). INCJ will acquire 69.2% of all outstanding shares, while the consortium of Toyota Motor Corp. (7203), Nissan Motor Co. (7201), Denso Corp. (6902), Keihin Corp.(7251), Panasonic Corp. (6752), Canon Inc. (7751), Nikon Corp. (7731) and Yasukawa Electric Corp.(6506) will own 5.8% in total.

INCJ In Talks With Sony For The Purchase Of Battery Operations

According to a Nikkei report, Sony Corp. (6758) has begun negotiations to sell its battery operations to the Innovation Network Corp. of Japan and  the government-backed fund has already proposed a price. Plans under consideration include Sony going ahead with a full sale as well as retaining a partial stake.
Taiwanese firm Hon Hai Precision Industry Co. has reportedly shown interest as well.

Advantage Partners To Buy Sanyo's Camera Business

Sanyo Electric Co. a subsidiary of Panasonic Corp. (6752), will sell its digital camera business to Advantage Partners. Sanyo spun off its digital camera and movie camera business section to Sanyo DI Solutions Co. in July this year to streamline operations. Sanyo and the special purpose company to be funded and managed by Advantage Partners entered into an agreement on the transfer of all the shares of Sanyo DI Solutions as of March 31, 2013. Financial terms are not disclosed.

An earlier report by The Nikkei said "The deal to sell all shares in Sanyo DI Solutions Co., along with its Indonesian factory, for an estimated several hundred million yen would close a chapter in the streamlining effort." "Sanyo's digital camera business manufactures products for Olympus Corp. (7733) and other brands on an OEM basis. Squeezed by the spread of smartphones sporting high-quality cameras, the market for digital compact models has shrunk. Sanyo's annual production has slumped to roughly 5 million units from a peak of 17 million, accounting for around 30% of global output at the time, with sales down from 220 billion yen in fiscal 2003 to tens of billions of yen. The business has apparently been mired in red ink."

Sony To Sell Battery Business

Sony Corp. (6758) is reportedly in talks with Taiwan's Hon Hai Precision Industry Co., as well as Japanese and foreign investment funds, for a potential sale of its battery business. The sale could be partial. Sony's battery business generated roughly JPY 142.5 billion (USD1.7 billion) in sales in the year ended March 2012.

According to a Tokyo research firm, Sony controlled 6.9% of the global market for lithium ion batteries in the April-June quarter this year, placing the company at fourth in the world after Samsung SDI Co., Panasonic Corp. (6752) and LG Chem Ltd.

Brightrust And 3 Other Parties Won Study Mandate From Japan's Largest Pension Fund

Japan's largest public pension fund, the Government Pension Investment Fund (GPIF) awarded "feasibility study"  mandates to  4 institutions including Brightrust PE Japan.  In August, GPIF solicited bids to conduct feasibility study on the USD 1.3 trillion fund's possible future investments in private equity, infrastructure and real estate. After a detailed selection process, the study mandates were awarded to 4 bidders.

Brightrust PE Japan submitted a proposal that aims to address various research topics that GPIF seeks to find solutions or deeper understanding before the pension fund formally contemplates private equity style investment programs. Capital Dynamics, T&D Asset Management and law firm Atsumi & Sakai were also given mandates for their respective areas of expertise.


Reuters – Japan’s GPIF to Conduct Studies for Alternative Asset Investment
Posted on: November 26, 2012

Japan’s Government Pension Investment Fund has selected four companies to conduct feasibility studies for its possible future investments in alternative assets, including private equity, writes Reuters. GPIF holds 108.2 trillion yen ($1.31 trillion) in assets.

Reuters – Japan’s Government Pension Investment Fund, the world’s biggest public pension fund, said it has selected four companies to conduct feasibility studies for its possible future investments in alternative assets, including private equity.

GPIF, which holds 108.2 trillion yen ($1.31 trillion) in assets, almost about the size of the Australian economy, is keen to diversify its massive portfolio to generate higher long-term investment returns.
The fund has been paying out more in benefits to pensioners than it receives in contributions to the national pension system since the 2009/10 financial year as the Japanese population is ageing rapidly.
GPIF has selected Japanese law firm Atsumi & Sakai, Swiss private equity fund firm Capital Dynamics, Japanese life insurer-backed asset firm T&D Asset Management and Tokyo-based independent private equity consultant firm Brightrust PE Japan for the feasibility studies.
They are required to complete their studies by end-March, 2013.
The results of the studies will be presented to the public and to the members of fund’s investment committee for review in the future, a GPIF official said.
GPIF Chairman Takahiro Mitani told Reuters in October that the public fund is considering whether to diversify into infrastructure, private equity and property, although not into hedge funds.
The fund has already diversified its assets by starting to invest in emerging markets equities earlier this year.
The fund makes allocations in line with its model portfolio, which currently gives a weighting of 11 percent to domestic stocks, 67 percent to domestic bonds, 9 percent to foreign stocks, 8 percent to foreign bonds and 5 percent to short-term assets.
The portion of emerging markets equities was allocated from GPIF’s foreign equities portfolio. ($1 = 82.3700 Japanese yen) (Reporting by Chikafumi Hodo; Editing by Muralikumar Anantharaman)  

CITIC Japan Will Sponsor Polymatech Rehabilitation

CTIC Capital Japan will acquire 100% of Polymatech Co., a manufacturer of polymer parts for electronics industry, as sponsor under the civil rehabilitation process. With the investment from its 2nd fund, CITIC Capital Japan will send a few directors to Polymatech and leverage CITIC Group's network to assist the company to restore growth. Polymatech has production facilities in Japan (Fukushima), China, Malaysia and Indonesia and has a strong market position in mobile, car and home segment applications.

For details, please see:
http://www.citiccapital.com/admin/data/PageContentPage/ContentPage/20121108161526/BOD%20of%20Polymatech%20Nov%209%202012.pdf

Japan To Invest USD 15 Billion In Indian Infrastructure Projcts

Japan aims to carry out 19 infrastructure projects totaling roughly JPY 1.2 trillion (USD 15 billion) in western India through a coordinated government and private-sector effort to help India to obtain stable supplies of industrial water and power and improve its transportation and logistics networks. The projects will form the core of the Delhi-Mumbai Industrial Corridor.

Prime Ministers of both countries are expected to reach an agreement on the plans in a summit meeting scheduled for Friday.

The massive investment program will consist of JPY 240 billion (USD 3 billion) for water-related facilities, JPY 200 billion (USD 2.5 billion) for next-generation grids and power plants and JPY 760 billion (USD 9.5 billion) for transportation and distribution projects.

Sanyo May Sell Its Digital Camera Business To A Fund

Sanyo Electric Co., a subsidiary of Panasonic Corp. (6752), is reportedly in talks to sell its digital camera business to an investment fund and the sale may be completed by the end of this year. 

Sanyo has no camera brand of its own, instead it supplies products on an OEM basis to several firms including Olympus Corp. (7733).  Its digital camera production reached about 11 million units in the year ended March 2011. 

While Panasonic has its own digital camera operations, the businesses have been kept separate and Sanyo spun off its operations in this July with an eye toward their eventual sale. 

Carlyle Japan Closed 2 Deals In 40 Days

Carlyle Japan announced that Carlyle Japan Partners II fund will acquire a 100% stake in Diversey G.K. (“Diversey Japan”) from Sealed Air Corporation (NYSE:SEE) for approx. JPY 30 billion (USD 377 million). Carlyle will sponsor the management buyout of Diversey Japan, which is expected to be completed in the 4th quarter of this year. Diversey Japan is a leading provider of cleaning, sanitation and hygiene products and solutions, mainly to institutional clients, with trailing twelve month sales as of September 30, 2012, of USD 321 million. Diversey Japan marks the 2nd deal for CJP II fund just in 40 days.

On September 25, Carlyle Japan announced that it had acquired the entire shares of Arizona-based engine component maker Walbro Engine Management from Sun Capital Partners. Financial terms were not disclosed. Walbro is the world’s largest manufacturer of carburetors in the lawn & garden market and a major manufacturer of ignition systems, fuel injection and air/fuel management components. It employs 2,200 people in the United States, Japan, Thailand, China and Mexico.

Sun Capital invested in Walbro in 2007 from its fourth fund. So far this year, Sun Capital has 7 realizations and Walbro is the 4th sale to a private equity firm. 

NTT DoCoMo To Set Up JPY10bn Venture Fund

NTT DoCoMo (9437) will establish a JPY 10 billion (USD 126 million) corporate VC fund, Docomo Innovation Fund, for investing in a wide range of fields, including the internet, healthcare, finance and media, by March next year. The firm will also institute a business incubation program. "DoCoMo Innovation Village" will pay development costs and provide office space and other infrastructure to promising projects.

While Docomo already has a VC fund in Silicon Valley,   this is a new effort for Docomo to focus on domestic ventures. Its parent NTT has two corporate venture funds. Its rival KDDI Corp. (9433) set up its own JPY 5 billion venture fund in February to invest in internet-related fields.

Panasonic May Look To Sell Its Cell Phone Business

Panasonic Corp. (6752) will consider selling the Japanese cell phone business or forming a partnership with another company, while it will end European operations as early as fiscal 2012, The Nikkei reported.

Panasonic currently sells mobile handsets in Europe and in Japan. Panasonic, lagged behind rivals in releasing smart phones, has already begun restructuring the business by shutting down its domestic factory in Shizuoka Prefecture and moving production to Malaysia. The cost of restructuring the mobile phone business may total JPY 100 billion (USD 1.25 billion).

The company sold 5 million smartphones and generated some JPY 130 billion in sales from the mobile phone business in fiscal 2011. Earlier it targeted tripling the sales volume to 15 million units in fiscal 2015.

As of July, Panasonic projected a net profit of JPY 50 billion (USD 630 million) for the current FY through March, a turnaround from the previous year's net loss of some JPY 770 billion.