Longreach targets $800m for Japan, Greater China mandate

There have already been small closes with existing investors and now the firm is broadening its marketing efforts, according to a source close to the situation. It coincides with the exit of Hong Kong-headquartered medical devices manufacturer Quasar Medical, which has returned nearly the entirety of the Fund III principal.

Longreach declined to comment on fundraising.

Quasar, which has been sold to Chinese private equity firm Boyu Capital, was acquired in April 2019, not long after the final close of Fund III. Longreach raised USD 650m for that vehicle, relying on commitments from corporate and government pension funds, sovereign wealth funds, financial institutions, and fund-of-funds.

Japanese LPs accounted for 40% of the corpus – up from 27% in Fund II – while the North America and Europe share held steady at 40% even as the fund size rose from USD 400m in the previous vintage. Re-ups from the likes of Korea Investment Corporation (KIC) and Temasek Holdings-owned Pavilion Capital were responsible for much of the 20% Asia ex-Japan contribution.

On closing Fund III, Mark Chiba, group chairman and a partner at Longreach, observed that Japan was falling back in favour with LPs because PE investors had demonstrated track records. “[LPs] might have China exposure that looks great on paper but there are issues around liquidity, so they are willing to do something a bit more conventional in terms of buyouts,” he told AVCJ in 2019.

The landscape has shifted significantly since then. Many investors are looking to ease their China exposure or at least achieve greater diversification in Asia, resulting in greater interest in other markets in the region. The source added that increased participation from fund-of-funds and family offices “that were all-in on China and now are shifting to look at Japan” is expected in Fund IV.

Quasar was one of nine investments from Fund III. Three of the others are Japanese coffee shop chains. Longreach acquired Kohikan in 2018 through a carve-out from UCC Foodservice Systems, and later added Chat Noir and Pokka Create Corporation, operators of Caffe Veloce and Café de Crie, respectively.

The private equity firm has also been active in IT services, assuming control of Japan Systems in 2021 after persuading the company’s US-based parent to sell through a tender offer and then picking up local player Blueship earlier this year.

Other Fund III portfolio companies include Amazon Papyrus Chemicals Holdings, a Hong Kong-headquartered chemicals supplier to the pulp and paper industry, Wellness Communications Corporation, a healthcare software-as-a-service (SaaS) provider, and electronic products manufacturer Fujitsu Component. The latter two are both based in Japan.

Two companies remain from earlier funds: Japanese casual dining chain Wendy’s First Kitchen and Taiwanese lender EnTie Commercial Bank.

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• Topics
• North Asia
• Buyout
• Fundraising
• GPs
• Japan
• The Longreach Group Limited
• Fundraising