Bloomberg News

Ex-Goldman Banker Seeks Debut PE Fund Investment at Kizuna

October 02, 2011

(Updates with Japan’s buyout figures in seventh paragraph.)

Oct. 3 (Bloomberg) -- Kizuna Capital Partners Co., backed by Mitsubishi Corp., is looking at Japanese companies in the alternative energy and health-care industries for its debut investment of a $120 million private-equity fund.

The MC Creat Investment fund started in August to invest in Japanese and Chinese firms that are trying to expand their businesses in the two countries, said Tokyo-based Chief Investment Officer Kenji Tanaka. The fund, set up by Mitsubishi, Japan’s biggest trading company, and Creat Group Co., a Beijing- based investment company, aims for an internal rate of return of about 20 percent, he said.

The fund wants to take advantage of opportunities as Japanese companies seek to capture demand from China, while Chinese firms seek Japan’s technological expertise, said Tanaka.

“While top Japanese companies have already branched out in China, there are plenty of second-tier firms that are trying to expand there,” he said in an interview in Tokyo on Sept. 29. “In the meantime, privatization is finally starting to take place among Chinese companies, and they are looking to go abroad and partner with Japanese firms, so it’s a good time for us to be looking for deals.”

Tanaka, a former banker at Goldman Sachs Group Inc., has narrowed down to five to six potential investment targets out of 20 to 30 companies, and plans to make the first investment by the end of the first quarter of 2012.

Alternative Energy

Parts makers in the alternative energy industry, medical equipment makers, companies in the robotic field that may benefit as China cuts personnel costs, are among those that may fit the first investment, Tanaka said. The fund, managed by Hong Kong-based MC Creat Fund Management, will last for 10 years and will look to invest in the first five years, he said.

Buyouts in Japan worth between 5 billion yen and 30 billion yen each more than doubled last year to 20 from eight in 2009, according to Japan Buy-out Research Institute Corp. Overall, buyouts dropped to 44 in 2010 from 59 the previous year, according to the researcher.

“We will see some correction in China’s growth story, but there is no doubt that the underlying economy still remains strong,’” Tanaka said. “While depending on the industry, the demand from China is expected to be about 10 times more than that of Japan, so this is a great opportunity.”

Most global investors predict Chinese growth will slow to less than half the pace sustained since the government began dismantling Mao Zedong’s communist economy three decades ago, a Bloomberg poll last month indicated.

Fifty-nine percent of respondents said China’s gross domestic product, which rose 9.5 percent last quarter, will gain less than 5 percent annually by 2016. Twelve percent see such a slowdown within a year, and 47 percent said it will occur in two to five years, the quarterly Bloomberg Global Poll of investors, analysts and traders who are Bloomberg subscribers showed.

--Editors: Andreea Papuc, Linus Chua

To contact the reporters on this story: Tomoko Yamazaki in Tokyo at tyamazaki@bloomberg.net; Shunichi Ozasa in Tokyo at sozasa@bloomberg.net

To contact the editors responsible for this story: Andreea Papuc at apapuc1@bloomberg.net; Frank Longid at flongid@bloomberg.net


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