J-Star completes clothing brand turnaround

Seeing an opportunity, J-Star purchased the company's Japan unit in full from the creditors of parent company Moku des Moku, at 5x EDITBA. The private equity firm then focused both on strengthening the business in Japan and expanding operations overseas, which led to the acquisition of Olive des Olive's Shanghai subsidiary in late 2010. Four years on, J-Star has seen a 3x return on its investment, representing an IRR of 35-40%.

"We focused on increasing the company's foot print in China by increasing the number of stores from 35 to 116," says Gregory Hara, president of J-Star, who describes the brand as having a large share in the niche "sweet, girly, natural" fashion segment. "We also wanted to see a more concrete and stable cash flow from the domestic market so we worked on the company's merchandising policy and changed the store locations."

While the number of stores in Japan increased by just six to 86, new revenue streams were opened up by selling Olive des Olive's products online for the first time.

Internet-based transactions now total JPY150m a year.

By the end of the holding period Hara feels Olive des Olive had begun to establish itself as a true Asian brand with stores opening in Korea and Taiwan and more planned for Hong Kong and Singapore. The company is now debt-free while EBITDA has grown from JPY200 million to JPY600 million and sales have increased from JPY5 billion to JPY8.8 billion.

When it was time to sell, Hara explains J-Star had came close to exiting through a secondary sale to another Japanese GP. However, the transaction never materialized so Japanese clothing wholesaler Takisada- Osaka came in for the asset.

"We see Takisada-Osaka as an ideal new sponsor and business partner for Olive des Olive," says Hara. "The company is not only highly regarded in Japan but also has a strategy to shift its business focus to branded apparel and grow its presence in emerging countries, thus the relationship is very complementary."

This is J-Star's fourth exit from its first fund, J-Star No.1 Investment Enterprise, a JPY12 billion vehicle that closed in December 2007. Three of these exits have been in the last year, all to strategic buyers. In September, the PE firm exited lifestyle marketing company IkiIki to a subsidiary of Noritsu Koki group, while in October it sold pharma contract sales firm Apo Plus Station to Qol, a Tokyo-based pharmaceutical company.

The private equity firm is currently raising its second fund, which has a target of JPY15 billion.

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• Topics
• North Asia
• Consumer
• Exits
• Consumer
• J-Star
• Exit
• Japan