Polaris hits hard cap on fifth Japan fund, prepares for final close

Speaking to Mergermarket, AVCJ’s sister title, Kimura said there was sufficient investor demand to raise JPY200 billion. The fund is more than twice the size of its predecessor, which closed at JPY75 billion in 2018. A separate source confirmed to AVCJ that the fund is oversubscribed and a final close is imminent.

Should the final close happen as planned, it would be the largest PE vehicle raised by a Japanese manager since the global financial crisis, surpassing Japan Industrial Partners, which closed its latest fund at JPY148.5 billion in 2018. The biggest Japan fund raised by any independent manager is The Carlyle Group’s fourth country-focused vehicle. It closed in March at JPY258 billion.

Kimura noted that Polaris is frequently asked why it has scaled up in fund size in recent years. Part of the reason is the unique position of domestic private equity GPs regarding corporate carve-outs.

“Japanese blue chips such as Fujitsu and Panasonic are not able to divest their larger non-core businesses to Japanese private equity firms due to fund size limitations, and then these businesses end up going to foreign private equity firms,” he told Mergermarket. “Some of these Japanese corporates have expressed that they want a ‘Japanese solution,’ and this is where we can come in.”

The first investment from Fund V is the JPY76.3 billion privatization of Sogo Medical Holdings, a local pharmacy chain operator and B2B healthcare management platform. Hamilton Lane participated as a co-investor.

LPs in the new fund include Canada Pension Plan Investment Board (CPPIB) and Pennsylvania Public School Employees’ Retirement System (PSERS). PSERS noted that a first close of JPY81.6 billion came in November 2019 and JPY117.4 billion had been raised as of July. It stated that Polaris would pursue investments in businesses with enterprise values of JPY11-74 billion

There is also a co-investment sidecar that will participate in deals that exceed 8% of commitments to the core fund. Sources previously told AVCJ that the fund would comprise two vehicles: a core fund of JPY120 billion and a JPY30 billion sidecar.

In addition to carve-out opportunities, Polaris will consider succession, restructuring and take-private transactions. Core industries include manufacturing, technology, healthcare, consumer, IT, services, and logistics.

Kimura added that Altair Capital, Polaris’ ASEAN-focused affiliate, is preparing to close its debut fund with commitments of $100 million. The firm targets investments in Singapore, Malaysia, Thailand, Indonesia, and Vietnam.　 

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• Topics
• North Asia
• Buyout
• Fundraising
• Japan
• Polaris Capital