Carlyle upbeat on Japan, expects to launch new fund in 2013
The Carlyle Group says it has already begun preliminary talks with investors for a third Japan fund, and remains upbeat about opportunities in the country's buyout space.
"We will do another Japan fund at some point and we will not merge it with our Asia fund," David Rubenstein, Carlyle's founder and co-CEO, said while discussing the firm's fourth-quarter earnings. He didn't specify how large the fund might be, but it is likely to launch some time in 2013.
Rubenstein added that Carlyle had never felt comfortable with the idea of a combined Asian fund when it first set up Japan operations in 2000, preferring instead to have a team of investment professionals dedicated to a country-focused vehicle.
Bill Conway, also co-CEO, said Japan had been a great market over the last couple of years where companies on the public market had been trading at "very, very low multiples."
"Maybe they never should have been public or maybe they were just underappreciated for some reason," said Conway. "In a private setting, we've been able to have them become good cash generators." He noted that the yen has moved 20% against the dollar in the last three months, making the country more active and open to private equity.
Carlyle has been investing in Japan for more than a decade. Its 2001 Caryle Japan Partners I fund posted a 37% net IRR as of December 31, better than US and European funds raised around the same time.
Its subsequent fund, the Carlyle Japan Partners II raised in 2006, is still in investing mode and recorded a negative net IRR of 5%. The fund reached a final close of JPY215 billion ($2.2 billion), Japan's largest eer buyout fund, although the corpus was subsequently reduced to JPY165.6 billion.
In October, Carlyle Japan Partners II agreed to buy Diversey Japan, a cleaning supply business, from the Sealed Air Corporation for JPY30 billion ($377 million). The fund recently sold Qualicaps to Mitsubishi Chemical and completed a partial exit from Chimney. It is also expected to sell most of its holding in Broadleaf.
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