Longreach puts a ring on it

As Sawano acknowledged, there are other factors at work - not least Japan's falling birth rate and aging population. In late 2013, the number of people aged 65 and over crossed the 25% threshold for the first time. This share is expected to reach 40% by 2060.

Regional expansion is therefore a priority for Primo and this initiative will be supported by The Longreach Group, which has bought the business for a reported JPY20 billion ($170 million). Mainland China is a key target, with the GP hoping to replicate earlier successes in taking Japanese companies cross-border.

Founded in 1999, Primo produces semi-customized bridal jewelry, including engagement and wedding rings, for middle class consumers, operating in the segment below Cartier, Bulgari and Tiffany. The company operates under three brands - I-Primo, Lazare Diamond and Selexia - and seeks to differentiate itself from mainstream jewelry retailers by offering a focused, high-quality service with an attractive price proposition.

In addition to 76 stores in its Japan, the company has 10 outlets in Taiwan and two in Hong Kong. Primo also has a presence in Tel Aviv through which it sources diamonds directly from the market as opposed to relying on the costlier broker channel.

International expansion began in 2007 when the company opened its first store in Taiwan. It was under the previous owner, Baring Private Equity Asia, that the Hong Kong market was penetrated as well. The PE firm bought Primo in early 2011 for an undisclosed sum from a group of investors led by Goldman Sachs and Risa Partners. Primo reported annual sales of JPY15.7 billion for the year ended September 2014, up from JPY13.7 billion in 2013 and JPY12.2 billion in 2010.

While growth and operational efficiencies are expected from Japan - which accounts for the vast majority of Primo's sales - the combination of high quality products and services combined with affordable price points is tipped as a potential hit in China.

"It is not a jewelry business, but a bridal jewelry service - a highly targeted segment in which it is easy to recognize the value proposition," says a source familiar with the transaction. "It is a good targeted play for China because it is about aspiring middle class people getting married, not about party officials giving gifts."

Should the business achieve the scale it is targeting, three viable exit paths emerge: an IPO, a trade sale to a strategic buyer, or secondary buyout - which would put Primo into its fourth pair of private equity hands.

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• Topics
• Buyouts
• North Asia
• Secondaries
• Consumer
• Exits
• Secondaries
• Consumer
• Japan
• The Longreach Group Limited
• Baring Private Equity Asia
• Exit
• buyout