Longreach buys jeweler Primo Japan from Baring Asia

The size of the transaction was not disclosed but AVCJ understands the figure of JPY20 billion ($170 million) reported by Nikkei is broadly accurate.

According to AVCJ Research, Baring Asia bought Primo in January 2011 for an undisclosed sum from majority owners Goldman Sachs and Risa Partners, which held 47% and 26%, respectively. Strategic players Hikari Tsushin and Usen Corp. exited at the same time.

Founded in 1999, Primo produces semi-customized bridal jewelry, including engagement and wedding rings, for middle class consumers, operating in the segment below Cartier, Bulgari and Tiffany.

The company seeks to differentiate itself from mainstream jewelry retailers by offering a focused, high-quality service with an attractive price proposition. "It is not like walking into a jewelry supermarket and going to the bridal desk," said a source familiar with the transaction.

Primo operates under three brands - I-Primo, Lazare Diamond and Selexia - and claims to be the leading retailer of engagement and wedding rings in Japan. In addition to 76 stores in its domestic market, the company has 10 outlets in Taiwan and two in Hong Kong. Primo also has a presence in Tel Aviv through which it sources diamonds directly from the market as opposed to relying on the costlier broker channel.

Regional expansion is a priority for the company. Outlining Primo's goals for 2013, Naoki Sawano, the president and representative director, highlighted the need to enhance the domestic offering as well as accelerate the roll-out of stores elsewhere in Asia. He blamed Japan's falling birth rate and aging population - as well as a tendency among couples "to think of the proposal and the engagement ring as two separate things" - for the drop in the percentage of couples purchasing engagement rings.

Primo entered Taiwan in 2007 and, not long after Baring Asia's acquisition, the business was launched in Hong Kong. Primo reported annual sales of JPY15.7 billion for the 12 months ended September 2014, up from JPY13.7 billion the previous year. This compares to sales of JPY12.2 billion in 2010.

Longreach is expected to seek expansion opportunities in mainland China, a strategy it has pursued with several other Japanese portfolio companies. The thesis is that high quality products and services combined with affordable price points will resonate with the country's expanding middle class. It is thought this focus will also shelter Primo from the crackdown on extravagant gift-giving in government and corporate circles that has hit many luxury brands in China.

This is the third investment from Longreach's second fund, which reached a final close of $400 million in October 2012. The other two are both Japanese corporate carve-outs: Sol-Plus Group and Hitachi Via Mechanics.

Last year Baring Asia exited another Japanese jewelry-related asset - Net Japan, which purchases previously-owned gold, silver, platinum, palladium, diamonds and fine jewelry and sells to refining companies and trading firms - to Orix Corp.

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• Topics
• Buyouts
• North Asia
• Secondaries
• Exits
• Consumer
• buyout
• Secondaries
• Exit
• The Longreach Group Limited
• Baring Private Equity Asia
• Consumer
• Japan