Nikko, Citigroup launch $950m Japan fund

Japanese broker Nikko Cordial has teamed up with US financial conglomerate Citigroup to launch a new $950m buyout fund targeting Japanese companies.

According to a statement from Nikko, it is launching a buyout fund worth up to 100 billion yen (€772 million; $950 million) in partnership with Citigroup.

Citigroup and Nikko Principal Investments, the principal finance unit of Nikko, are both committing 11 billion yen into the Nikko Citigroup Japan Fund. The fund is aiming to announce an initial closing of 30 billion yen imminently, and is seeking further capital from global investors.

Nikko Principal Investments, which has completed more than 30 billion yen of investments in Japanese companies since it was established in March 2000, said the fund would target a final closing of at least 100 billion yen by March 2005.

Nikko spokesman Toshiharu Masuzoe said in a statement that the fund would invest in around ten companies and that the first investment was planned for the next six months. Nikko Cordial director Hajime Yamamoto added that the fund would aim to invest in companies with growth potential rather than reviving bankrupt companies, which has been the more common approach by private equity investors in Japan to date.

The fund launch is the latest sign of private equity’s increasing popularity in Japan. The country was Asia’s most popular destination for private equity investment in 2003, accounting for $7.3 billion of the $17.5 billion total according to the Asian Venture Capital Journal.

It has also been a successful time for fundraising. In January 2004, US private equity firm Carlyle Group closed its first Japanese buyout fund, Carlyle Japan Partners LP, on 50 billion yen (€370 million; $470 million). Other recent Japan-oriented fund offerings have been launched recently by the likes of Mizuho Capital, Basic Capital and JAFCO.

The opportunity to achieve superior returns in Japan was highlighted when the IPO of Japanese bank Shinsei in February 2004 created a windfall for its investment group, which was led by US private equity firm Ripplewood Holdings. Ripplewood has been a pioneer of the Japanese buyout market, having led the largest ever private equity deal in the country when it bought Vodafone’s Japanese fixed line telecom business in August 2003 for $2.2 billion.