J-STAR nets 5.1x on senior care provider

The Japan-based firm invested in the company from its maiden fund in 2011 

J-STAR, a Japan-based private equity firm, has sold portfolio company HCM Holdings, which provides nursing care and housekeeping services to seniors, to Sohgo Security Services, also known as ALSOK, in a deal valuing the company at around ¥8900 million (£50 million; $80 million), Private Equity International has learnt.

A source with knowledge of the transaction told PEI that J-STAR is anticipating a return multiple of 5.1x and an internal rate of return of 60 percent.

J-STAR declined to comment.

J-STAR acquired its stake in HCM in April 2011 in a management buyout that was reported to be valued at around $30 million. The firm made the investment from J-STAR No.1 Investment, a 2006-vintage ¥12 billion (£67 million; $107 million) vehicle focused on healthcare, retail, transport, and telecommunications, media and technology, according to Private Equity International’s Research and Analytics division.

According to a source, the company’s annual sales and EBITDA at entry were around ¥2700 million (£15 million; $24 million) and ¥300 million (£1.7 million; $2.7 million) respectively. Projected sales and EBITDA for this year are around ¥5500 million (£31 million; $49 million) and ¥500 million (£2.8 million; $4.5 million) respectively.

Over J-STAR’s holding period, the number of HCM staff members increased from around 1250 to around 1700, and the number of visiting care home stations increased from 62 to 75. The number of nursing homes increased from one to six, with revenues from the nursing home aspect of the business growing from ¥300 million (£1.7 million; $2.7 million), roughly equivalent to around 8 percent of the total sales, to ¥1500 million (£8.4 million; $13.4 million), or around 27 percent of total sales.

Founded in 2006, J-STAR has two investment vehicles. J-STAR No.2 Investment, a 2012-vintage, closed on ¥20 billion (£112 million; $180 million), above its target of ¥15 billion, according to Private Equity International’s Research and Analytics division.

In September, J-STAR booked an 8x return when it sold portfolio company Burn Holdings to Shinsei Corporate Investment and Creation Capital in a deal valued at around $50 million. In October 2012, the firm sold its majority stake in Apo Plus Station, another healthcare-related portfolio company, to Tokyo-based pharmaceutical firm Qol, netting a return of more than 3x.