Integral makes partial exit from Japan’s Skymark
Japanese private equity firm Integral Corporation has sold most of its remaining position in Skymark Airlines, the budget air carrier it took public in December last year.
Integral, which had a 20% stake in the company as of March, is offloading 13% to Suzuyo Holdings, a conglomerate with aviation interests.
The private equity firm acquired a 50.1% stake in Skymark in 2015 for JPY 9bn (USD 59.6m) via its second fund, which closed on JPY 44.2bn in 2014. It listed the company on the Tokyo Stock Exchange last December in a JPY 32.5bn IPO. The stock is down about 17% from its initial pricing, closing on November 8 at JPY 1,054 to give the company a market capitalization of about JPY 64bn.
Integral, which itself went public last September in a JPY 18bn IPO, said in a filing that the proceeds from the partial exit are expected to take Fund II past its hurdle rate of 8%. The fund will therefore start delivering carried interest and is expected to post a gross investment return of JPY 3.3bn for the financial year ending December 2023.
Skymark offers services between 12 Japanese cities via 177-seat aircraft. It has served more than 105m passengers since its inception in the late 1990s. Revenue improved 79% during the financial year 2023 to JPY 84.7bn. Over the same period, the company went from a loss of JPY 12bn to a gross profit of JPY 8.9bn.
The decision to take Skymark public last year snapped a drought in PE-backed offerings in Japan, outside of the exchange’s start-up board. It also represented an early example of confidence in the country’s post-pandemic rebound. “Skymark got hit by COVID-19, but it recovered. Domestic travel is increasing,” Tsuyoshi Yamazaki, a partner at Integral, observed at the time.
It comes within weeks of Integral agreeing to sell fertilizer maker Nitto FC to Ichinen Holdings, a listed automotive supplier with interests in industrial chemicals, for an undisclosed sum. Integral had privatised Nitto in 2019, taking a 94% stake for about JPY 30bn.
Integral is currently deploying its fourth fund, which closed on JPY 123.8bn in 2020. The firm seeks to distinguish itself through a dedicated in-house corporate value enhancement team and a strategy dubbed “deal-inducing investment,” whereby it puts balance sheet capital into investments alongside fund commitments.
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