Nikko’s Australian team spins out to form Tasman Capital

After a tortuous process Tasman Capital Partners has acquired Nikko's Australian portfolio and is to launch a mid-market private equity fund for investments in Australia and New Zealand.

The senior management of Nikko Principal Investments Australia has won its independence from Nikko Citi Holdings to form Tasman Capital Partners, a mid-market private equity firm, after a protracted battle for control between the UK and Australian partners.

Led by managing directors Rob Nichols, Janine Middleton and Gene Lorenz, Tasman Capital Partners had intended originally to work with Nikko's UK team to buy the banks' private equity portfolio and to split it between the two country teams in a friendly deal.

However, a source familiar with the negotiations said the UK team led by Brian Berry decided to bid against the Australian partners, who still reported to Berry throughout the auction.  Berry had begun work on a buyout of the business in December 2006, when the parent bank Nikko was hit by an accounting fraud, the source said.

The Australian team managed to keep its interest alive by initially partnering with UK secondary firm Vision Capital. Ultimately Nikko agreed to sell Nichols and his team just the Australian assets in the existing portfolio of Nikko Principal Investments Australia.

Ironbridge Capital, an Australian rival, and GIC Special Investments, the private equity investment arm of Government of Singapore Investment Corporation, a Singaporean sovereign wealth fund, backed Tasman's acqusition.

Nichols said in a statement that the spin-out and formation of Tasman Capital Partners was “a goal that we set out in earnest to achieve late last year”.

“We are now in the fortunate position of being able to offer investors the opportunity to invest in both our current portfolio as well as partner with Tasman in pursuing new investments,” he said.

Tasman Capital has taken over former Nikko portfolio company Hirequip, a New Zealand-based provider of equipment rental services. Provided it successully raises its debut fund, Tasman also has an option to acquire a stake in FleetPartners, a motor vehicle leasing business in Australia and New Zealand, that has been acquired by GIC and Ironbridge from Nikko.

Hirequip was acquired by Nikko and the company's management team in 2006.

Middleton said that the firm “will now commence the process of raising a new private equity fund to invest in medium sized Australian and New Zealand businesses.” The source said it was targeting A$350 million with a hard cap of A$400 million.

Nikko Principal Investments Australia was set up in Sydney in 2006 as the private equity arm of Japan’s Nikko Cordial, now a fully owned subsidiary of Nikko Citi Holdings. At the time of its inception, the firm assembled an investment team of six that included the core team of DB Capital Partners, the private equity arm of Australia’s Deutsche Asset Management.

Lorenzo and Nichols, now managing directors of Tasman Capital, were among those who quit DB Capital and made a move to Nikko in 2006.

Additional reporting Nicholas Lockley