May 15, 2017 7:00 am JST

Foreign private equity funds go big-game hunting in Japan

Investors flocking to revive and globalize their increasingly willing quarry

TOKYO -- Foreign private equity funds are snapping up Japanese companies with overseas potential, supported by investment from pension funds and financial institutions.

In March, U.S. private equity company Kohlberg Kravis Roberts acquired autoparts maker Calsonic Kansei from Nissan Motor and other shareholders for about 500 billion yen ($4.38 billion). In a separate deal this year, KKR purchased power tools company Hitachi Koki from Hitachi and other shareholders for over 140 billion yen.

The U.S. company is still on the hunt for opportunities in Japan, with plans to tender a joint offer with the public-private Innovation Network Corp. of Japan for Toshiba's memory unit. A KKR executive said he never expected to place a bid with a Japanese partner.

In late 2012, KKR lost its bid to acquire shares in Renesas Electronics when INCJ stepped in at the last minute to invest in the semiconductor manufacturer. Concerns over technology leaks were among the reasons cited for KKR's failed attempt.

More than four years on, corporate Japan appears far more willing to accept investment from foreign private equity companies with proven restructuring skills.

U.S. private equity company Carlyle Group, which made its foray into Japan in 2001, has funds specializing in Japanese companies to speed up investment decisions.

While KKR targets large transactions worth more than 100 billion yen, Carlyle focuses on smaller deals worth several tens of billions of yen.

Global ambitions

Foreign private equity companies often have the global networks needed to support the overseas operations of their investment targets. Bain Capital of the U.S. acquired Dutch market analytics company MetrixLab in 2014 through Japanese market research company Macromill. Since Bain's involvement, sales at Macromill have grown an average of 20% a year. The company relisted its shares on the Tokyo Stock Exchange in March, just three years after it was delisted.

European funds also see opportunities in Japan. CVC Capital Partners of the U.K. plans to pump more than 100 billion yen a year into Japan. The company's co-founder, Steve Koltes, called Japan "the fourth-most promising market" after the U.S., the U.K. and Germany.

CVC said that Nobuaki Kurumatani, former deputy president of Sumitomo Mitsui Banking, will be appointed the company's Japan president on May 1. CVC hopes to use Kurumatani's strong business connections to find promising investment targets.

Last year, British private equity company Permira, known for its ability to breathe new life into brands, acquired U.S. cosmetics maker John Masters Organics Group, which operates stores in Japan.

With money continuing to flow into experienced overseas private equity funds from pension funds and financial institutions with extra cash on their hands, the Japanese shopping spree may not just continue but intensify.

(Nikkei)

Nissan Motor Co., Ltd.

Japan

Market(Ticker): TKS(7201)
Sector:
Industry:
Consumer Durables
Motor Vehicles
Market cap(USD): 40,950.9M
Shares: 4,220.72M

Hitachi Ltd.

Japan

Market(Ticker): TKS(6501)
Sector:
Industry:
Producer Manufacturing
Industrial Conglomerates
Market cap(USD): 29,306.8M
Shares: 4,833.46M

Hitachi Koki Co., Ltd.

Japan

Market(Ticker): TKS(6581)
Sector:
Industry:
Consumer Durables
Tools & Hardware
Market cap(USD): 790.38M
Shares: 101.38M

Toshiba Corp.

Japan

Market(Ticker): TKS(6502)
Sector:
Industry:
Consumer Durables
Electronics/Appliances
Market cap(USD): 11,728.6M
Shares: 4,237.6M

Renesas Electronics Corp.

Japan

Market(Ticker): TKS(6723)
Sector:
Industry:
Electronic Technology
Semiconductors
Market cap(USD): 14,841.4M
Shares: 1,667.18M

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