Japan’s Tokio Marine to undergo management buyout

Investors have become increasingly cautious of committing to captive funds, president Koji Sasaki told PEI.

Tokio Marine Capital, one of Japan’s oldest private equity firms, will rebrand after agreeing a management buyout with its owners.

Five of its management staff will purchase 100 percent of the company’s equity from Tokio Marine & Nichido Fire Insurance, president Koji Sasaki told Private Equity International. Sasaki will co-own the company with general partner Eisuke Shigemura and partners Shigeru Matsumoto, Shunichiro Nakagawa and Kazutaka Komori.

Tokio Marine Capital will be renamed T Capital Partners on 1 October, according to a statement from the firm. Terms of the transaction were not disclosed.

“Lots of people, particularly overseas investors, told us our performance is quite nice but they can’t commit because we’re a captive fund,” Sasaki said.

“Japanese private equity investors, particularly banks and insurance houses, know us very well so they don’t care about our captive nature, but little by little some pension funds learned an overseas view of corporate governance and sometimes talk about the weak points of captive funds.”

Captive funds could be perceived as less appealing to limited partners as the parent company may have the power to enact significant changes at the general partner level without investor approval or input, Sasaki said.

Tokio Marine & Nichido Fire Insurance Co will retain its position in T Capital’s most recent fund, the ¥51.7 billion ($480 million; €436 million) TMCAP2016, Sasaki added. That fund is almost 50 percent invested.

“The relationship between the parent and ourselves has been good, but the final question was our capital structure,” Sasaki said. “It was the only issue LPs had.”

T Capital was founded in 1991 as the corporate venture capital arm of Tokio Marine, according to its website. The firm began third-party fund management in 1998 and transitioned to a pure-play buyout shop in 2005.

Its portfolio includes aerospace manufacturer Imai Aero-Equipment, child desserts manufacturer Ropia and confectionery wholesaler Confex.

The private equity industry has witnessed some notable management buyouts in the past decade. European giant Equistone was owned by Barclays Capital, the investment banking division of Barclays Bank, until 2011. Last year, ICG backed a management buyout and spin-out of Standard Chartered’s private equity business to form Affirma Capital.