Unison, Polaris complete secondary deal

Japanese private equity firms Unison Capital and Polaris Principal Finance concluded a rare secondary deal in the sale and purchase of a controlling stake in Japanese drug store chain Eleven Holdings.

In a further sign that the Japanese buyout market is coming of age, Tokyo-based independent private equity firm Unison Capital Partners has announced its exit from an investment in Drug Eleven Holdings, a drug store chain, via a secondary sale to Polaris Principal Finance. Terms of the transaction, which involves the transfer of a 92 percent stake in Drug Eleven, were not disclosed. The transfer is expected to be finalised in mid-April.

To date, very few secondary private equity deals have been concluded in Asia, which remains a relatively young market for private equity investments. In Japan, according to an industry source, no more than five sponsor-to-sponsor transactions have been done to date.

Polaris is a private equity joint venture formed by Japanese institutions Mizuho Securities and DLIBJ Asset Management, an entity co-owned by Dai-Ichi Mutual Life Insurance Co and Mizuho Financial Group.

Drug Eleven is a drug chain store with main product lines in pharmaceuticals, cosmetics and health products, with 172 stores in Kyushu and Okinawa area as of February. Unison invested in Drug Eleven in September 2003, when the company was undergoing financial difficulties. “Drug Eleven has since undergone a significant turnaround… (and) emerged from its financial crisis and firmly regained its profitability,” according to a statement from Unison.

Drug Eleven is now entering a growth stage, and Polaris hopes to take it toward an IPO, Kaori Yagi, a managing director at Polaris, told PEO in an interview. The new owner is expected to invest in new outlets for the company.

Polaris manages a ¥29.6 billion ($252 million; €205 million) private equity fund that closed in February 2005. The fund has an eight-year investment period, and Polaris can invest up to 25 percent of the fund in one deal. Conservatively, the fund is expected to make 10 to 20 investments, and the holding period for each deal could range from 3 to 5 years, Yagi told PEO.

Prior to the Drug Eleven deal, Polaris has so far done one other MBO. Last November, it acquired SMILE Corp, a development, import and wholesale of merchandise and packaging materials business, from Japanese supermarket and convenience store operator Seiyu.