CLSA Plans to Raise Up to $500 Million for Japan Fund

CLSA Capital Partners plans to raise as much as $500 million for a buyout fund to invest in Japanese companies that have strong domestic demand and potential to expand in new markets such as China.
The fund will start within two months and buy stakes in seven to eight mid-sized companies worth about 5 billion yen ($50 million) to 30 billion yen each, Managing Director Megumi Kiyozuka said in an interview in Tokyo on April 10. The fund will be housed in the alternative asset management arm of CLSA Asia-Pacific Markets, which has $2.5 billion in assets.
“We’re seeing attractive valuations across the board now,” said Kiyozuka, 47, who worked at Carlyle Group before joining Hong Kong-based CLSA Capital in 2006. “We’re also seeing less competition in the private equity market now, and that’s an edge for us with the focus we have on Japan.”
The Topix index of 1,706 companies slumped 32 percent during the past year, making targets cheaper for buyout funds. The credit crunch has also made it harder for them to raise money, with private equity funds attracting $46 billion in capital in the three months through March, the worst quarter in six years, according to London-based research firm Preqin.
The fund, which has yet to be named, follows the 2006 launch of CLSA Sunrise Capital, which also focuses on Japan and has invested in companies ranging from clothing maker Baroque Japan Ltd. to Everlife Co., a health-care firm based in Fukuoka prefecture.
Baroque, Everlife
CLSA Sunrise helped Tokyo-based Baroque -- known for its “moussy” brand targeting women in their teens and 20s -- through a management buyout in September 2007 and is now guiding its expansion plans in China and preparations to list on the stock exchange. It is also helping Everlife with listing plans and growth in China.
Companies unable to raise funds through stock exchange listings -- which dropped to the lowest in Japan since 1992 last year, according to data compiled by Bloomberg -- may turn to private equity investors instead.
Announced private equity transactions in Japan in 2008 totaled $8.1 billion, compared with $6.8 billion a year earlier, according to data compiled by Bloomberg. Carlyle Group, the world’s second-largest private equity firm, was involved in only one transaction in 2008, while Kohlberg Kravis Roberts & Co., the New York-based buyout firm, had none, according to spokespeople for the firms.
More than 1,670 private equity funds are currently seeking $887 billion from investors, Preqin said in a report on April 1. The funds are taking longer to sign up investors and at least nine scrapped fund-raisings in 2009, it said.
“We see value in deals that we get through our network and connections,” Kiyozuka said. “Private equity firms should work behind the scenes in turning businesses around, and investors who understand that concept are still out there to provide funds.”