Japan's J-Star completes final exit from debut fund

The investment, made in March 2011, has delivered a gross multiple of 7x and a gross IRR of more than 30%, according to a source familiar with the situation. The exit brings the multiple for J-Star No.1, which launched in March 2006 and closed at JPY12.25 billion ($109 million) in December the following year, to 3x.

Taiheiyo Seiki produces undercarriage parts and precision hydraulic components for construction and mining machinery, with a focus on hydraulic excavators. It has manufacturing facilities in Japan and China, and sells its products to construction equipment manufacturers globally.

In 2011, China accounted for 60% of the company’s sales and these took a hit during an economic slowdown in 2014-2015. Steps were taken to reduce this concentration risk, such as by developing the domestic customer base. The China share of sales is now 12%. Taiheiyo Seiki generated about $100 million in revenue for the most recent financial year and $10 million in EBITDA.

The buyer, Takitai-owned TKY, was established in 1927 and is primarily involved in textiles. It also has a presence in the real estate sector and the purchase of Taiheiyo is intended to further diversify the business.

Other notable exits from J-Star’s first fund include: clothing brand Olive des Olive, a turnaround that returned 3.1x; healthcare services provider HCM Corporation with 5.1x; Burn Repair with 8x; and lifestyle mail order business Iki Iki with 7.5x. Earlier this year, the GP completed the first exit from its second fund, securing a 5.1x return on Primagest.

J-Star closed its third lower middle-market buyout vehicle in April at the hard cap of JPY32.5 billion. This compares to JPY20.4 billion for Fund II.

BDA Partners and Sumitomo Mitsui Trust Bank served as financial advisors on the Taiheiyo Seiki exit, while Baker & McKenzie provided legal counsel.

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• Topics
• North Asia
• Trade sale
• Industrials
• Japan
• J-Star
• manufacturing
• Exit