CITIC Capital closes third Japan fund at $268m

CITIC Capital Japan Partners III launched in February of last year with a target of JPY25 billion, and a first close of JPY20.5 billion came in July 2016. The private equity firm said the vehicle was oversubscribed, with considerable demand from Japanese and foreign investors, including sovereign wealth funds, financial institutions, pension funds, and fund-of-funds.

Japan private equity fundraising came to $3.4 billion in 2016, down slightly on the previous year, but 2017 is expected to be more prolific with a host of middle-market managers all seeking capital for new vehicles. Last month, Tokio Marine Capital reached a second close of JPY41.7 billion on its latest fund, which has a full target of JPY50 billion. Advantage Partners, CLSA Capital Partners, J-Star, NSSK, Polaris Capital and Ant Capital Partners are among the others in the market.

CITIC Capital closed its first Japan fund at JPY16.9 billion in 2005 and then raised JPY18.2 billion for its second vehicle in 2011. Fund III follows a similar strategy to its predecessors, pursuing buyouts of middle-market Japanese companies with strong China growth prospects.

This approach paid off last year with the sale of packaging manufacturer Tri-Wall to a domestic trade buyer for $221.7 million. CITIC paid $65.5 million for a 67.1% interest in the business in 2010 – as a joint investment from its Japan and international funds – and helped the company build a stronger presence in China and Europe. Revenues grew twofold during the holding period.

The three existing deals in Fund III are apparel brand Mark Styler, women’s footwear retailer Akakura, and an unnamed diagnostic drug manufacturer. All three are seen as having strong China expansion potential. The fund will make approximately 10 investments in total, focusing on consumer goods and services, as well as manufacturing.

Yichen Zhang, chairman and CEO of CITIC Capital, said in a statement that the fundraise “is a recognition of our success in establishing a strong franchise in the Japan PE market, and a validation of the tremendous investment opportunity presented by Japanese companies requiring backing in their international expansion, and our deep network of China relationships.”

CITIC Capital Holdings, which is owned by the Hong Kong-listed entity of CITIC Group, Tencent Holdings, Fubon Life Insurance, and Qatar Holdings, manages more than $18.7 billion across private equity, real estate, structured investment and finance, and asset management. The PE arm operates in China, the US and Japan and manages $4.5 billion in committed capital. It is currently seeking $1.5 billion for its latest China vehicle, having combined the teams that previously pursued separate China and international strategies.

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• Topics
• North Asia
• Buyout
• Fundraising
• GPs
• Japan
• CITIC Capital
• Consumer
• manufacturing