Polaris closes fourth Japan fund on $665m
Polaris Capital Group has hit the hard cap of JPY75 billion ($665 million) for its fourth Japan fund, becoming the third Japanese mid-market GP to announce a final close in the space of a week, and the sixth since the start of the year.
Polaris Private Equity Fund IV was launched in December 2016 and reached a first close of JPY52 billion in late January, with JPY32.5 billion in commitments from domestic LPs and JPY19.5 billion from overseas LPs. By the final close, which came on April 27, the domestic-offshore split was about 50-50. Local investors include banks, insurers, securities companies, corporate pension funds and government institutions.
Fund IV represents a big step up in size for Polaris, which closed its third vehicle at JPY39.1 billion in 2012. The firm raised JPY31.9 billion for its second fund in 2007 and JPY29.6 billion for its first in 2004. Fund I is fully realized and Fund II was nearing that point when the most recent vehicle was launched.
Fund IV will invest in mid-cap companies that are not realizing their growth potential due to legacy constraints and introduce initiatives aimed at revitalization. Its targets are divided into two categories: manufacturing companies, including healthcare, that have globally competitive technologies; and businesses with strong brands, unique business models and prospects for regional expansion across consumer, retail, logistics and services.
Polaris announced two exits from Fund III around the time of the fund launch, with agreements to sell beauty salon operator Socie World to Isetan Mitsukoshi Holdings for an undisclosed sum and electronic components manufacturer Clean Surface Technology to Mitsui Matsushima for JPY4 billion. It acquired the companies in 2013 and 2014, respectively.
The GP announced five investments last year. Three of these were carve-outs: medical device manufacturers Ai-medic and MMT were bought from Noritsu Koki, timber and building materials company Hivic from Lixil, and an LCD panel business from Hitachi. Meanwhile, the purchase of power generation equipment provider Yodogawa Transformer was a business succession situation and the acquisition of wedding ceremony guest house operator Novarese was structured as a tender offer.
CITIC Capital was the first GP to close a Japan mid-market fund this year, raising $268 million for its third vehicle. A spate of activity in April was led by Tokio Marine Capital, which closed its fifth fund at JPY51.7 billion, and Integral Group, which completed fundraising for its third vehicle with JPY73 billion in commitments. Then in the past week, J-Star and Advantage Partners announced final closes of JPY32.5 billion and JPY60 billion on their third and fifth funds, respectively.
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