KKR signs $1.67bn Japan buyout

The global private equity firm has acquired the healthcare unit of Panasonic, the first deal made public from its $6bn Asia Fund II.

Deploying the first chunk of capital from its latest Asia Pacific fund, Kohlberg Kravis Roberts has acquired the healthcare until of Panasonic in a deal worth JPY 165 billion (€1.24 billion; $1.67 billion), according to a company statement. The firm is taking an 80 percent stake in the business, with Panasonic retaining 20 percent. 

The deal is still subject to approval by authorities and is expected to complete by the end of March 2014. While it is the first transaction announced by the firm from Asia II, a source close to the matter said another deal is likely to complete before the Panasonic deal closes next year. 

Panasonic’s healthcare unit focuses on three core areas of expertise – in vitro diagnostics, medicom and biomedical services. KKR, with Panasonic, expect to leverage their business resources and healthcare investment network globally to further grow Panasonic Healthcare, the statement said. 

“Panasonic Healthcare has excellent market positions and high-level technical capabilities, and we believe it has significant growth potential,” KKR co-Founder and co-chief executive, Henry Kravis, said in the statement.

We've seen activity in places like Australia, in terms of the pipeline being busy. Japan is looking a bit more active as well. It's hard to predict where that goes. But as that market opens up, there's meaningful opportunity there. So I'd say the pipeline is strong and broad-based.

Scott Nuttall, head of global capital and asset management group, KKR

KKR closed a record $6 billion Asia fund in July this year, sparking questions from the industry about how the firm will deploy the most capital ever raised by one fund for the region. However, on a visit to Asia in September, Kravis remained confident that the firm would be able to.

The deal is only KKR's second investment in Japan, but officials previously identified Japan and Australia as key potential markets to invest the new fund. 

“We’re seeing more potential activity today [in Japan] than we’ve ever seen,” Kravis said on a recent visit to Asia.

The firm also strengthened its Japan team. In April, it promoted Shusaku Minoda to chairman of the country, hiring Hirofumi Hirano from AlixPartners Asia to replace him as managing director and chief executive of KKR Japan. 

“We've seen activity in places like Australia, in terms of the pipeline being busy. Japan is looking a bit more active as well. It's hard to predict where that goes. But as that market opens up, there's meaningful opportunity there. So I'd say the pipeline is strong and broad-based,” Scott Nuttall, head of the global capital and asset management group, said on an earnings call in July. 

Similarly, speaking at the HKVCA Private Equity Asia Forum earlier this year, managing partner of KKR Asia, Joseph Bae, highlighted Japan as a key focus for the firm in 2013 and for the duration of the firm’s second Asia fund, Private Equity International reported earlier.

Bae explained the firm has been cautious about Japan over the past five years as it hasn’t offered a compelling risk-reward story. However, he said KKR’s prediction is that Japan will become “very relevant”, and offer a number of large scale opportunities going forward as many large Japanese corporates lack operational capabilities and expertise in growing companies abroad. Bae expects at least three or four investments from the KKR Asia Fund II to be made in Japan.