J-STAR ups stake in Japan IT firm

The Gregory Hara-led firm has acquired a controlling stake in Primagest as the latest investment from its $200m Japan Fund II.

Private equity firm J-STAR has made its second significant investment in IT services company Primagest, now holding roughly two-thirds of the business, according to the firm. It declined to disclose the deal value, but said the company has an enterprise value of around $100 million. 

J-STAR first invested in the business in June this year, taking just under 35 percent of the company. Following a series of subsequent small investments and its most recent large investment, the firm has now taken a controlling stake, although it previously had majority voting rights in the business. 

Primagest develops, manufactures, and sells hardware and software to provide image information processing services, as well as providing outsourcing and maintenance services of the systems it develops. 

J-STAR intends to expand Primagest’s business lines as more companies require improved IT infrastructure and strategies, according to the firm.

J-STAR's contribution is to replace a pricey mezzanine tranche with equity [and] partially with a senior loan. In effect, the transaction brought significant financing cost savings. Also, J-STAR will help the company’s succession plan and support smooth transition from a founding management team to new management

J-STAR statement

The equity injection is replacing an inadequate capital structure comprised of senior loans, mezzanine debt and equity. 

“J-STAR's contribution is to replace a pricey mezzanine tranche with equity [and] partially with a senior loan. In effect, the transaction [has] brought significant financing cost savings. Also, J-STAR will help the company’s succession plan and support smooth transition from a founding management team to new management,” the firm said in the statement.

Primagest is the second portfolio company in J-STAR’s recently raised second fund. The firm made a final close on its hard cap of JPY 20 billion (€153 million; $201 million) in July this year, having raised JPY 11.6 billion  from domestic investors, with the balance coming from international sources of capital, Private Equity International reported earlier.

J-STAR has so-far invested in 18 companies since its founding in 2006. In July, it invested JPY 1 billion in Tokai Trim Holdings, a domestic car and motorcycle seat manufacturer, according to an earlier statement. The acquisition was a co-investment with the Supply Chain Support Fund, a joint vehicle launched by Japan Auto Parts Industries Association and the Development Bank of Japan