Tokio Marine to Raise $590 Million for a New Buyout Fund, Invest Next Year

Tokio Marine Holdings Inc., Japan’s second-largest casualty insurer, plans to raise as much as 50 billion yen ($590 million) for a new buyout fund focused on Japan’s middle-sized companies.
Tokio Marine Capital Co., the private-equity arm of the insurer, aims to raise about 15 billion yen this year and reach its target by the end of 2011, said Hideaki Fukazawa, the president of the Tokyo-based unit. It plans to start investing as early as next year, he said.
The buyout fund will be the fourth offered by Tokio Marine Capital as firms recover from a 57 percent plunge in the value of global private-equity fundraising that peaked three years ago. Fukazawa aims to invest in mid-cap Japanese companies with 5 billion yen to 50 billion yen in annual sales, he said.
“We’re finally starting to see some recovery in the private-equity market here,” Fukazawa, 54, said in an interview in Tokyo on Sept. 17. “Japanese mid-sized companies have great technology with ample potential.”
Tokio Marine Capital, founded in 1991, has approached Japanese institutional investors who have invested in its previous funds including major banks, insurers and foreign public pension funds and sovereign wealth funds, he said.
Funds globally raised $281 billion last year, dropping from the record $646 billion collected in 2007, according to London- based researcher Preqin Ltd.
KKR’s Investment
Private-equity firms pool money from investors to take over companies using a mix of cash and debt with the intention of selling them at a profit. Recent Japan private-equity deals include Kohlberg Kravis Roberts & Co.’s agreement in June to buy Usen Corp.’s human resources business -- its first in the nation.
The new fund will target “niche, top players” in their respective markets because it makes it easier to find buyers when the time comes to exit the investments, Fukazawa said. Tokio Marine Capital will also offer an off-shore parallel fund in conjunction with the new fund, allowing overseas investors to participate without the tax burden, Fukazawa said.
Tokio Marine Capital’s previous investments include Showa Yakuhin Kako Co., the maker of Acetaminophen-based pain reliever Calonal; Bushu Pharmaceuticals Ltd., which provides manufacturing and packaging services for global drugmakers; and Barneys Japan Ltd., an apparel and accessories retailer.
“Going forward, we’ll be interested in businesses involved with child care, health care and fashion including general manufacturers,” said Fukazawa.
Tokio Marine Capital’s first and second funds produced internal rates of returns of about 25 percent.