Apollo readies Japan private equity push, joining KKR and Carlyle


TOKYO — Headquartered in a skyscraper on New York’s 57th Street, otherwise known as Billionaires’ Row, alternative investment manager Apollo Global Management has amassed more than $400 billion in assets under management over its three decades.

Despite its status as a global private equity firm on a par with KKR and Carlyle, Apollo is a relatively unfamiliar name in Japan.

But this may be about to change. A year ago, under the leadership of CEO Leon Black, it hired 39-year-old Tetsuji Okamoto from Bain Capital. And he and his team have been actively visiting companies, scouring the country for potential targets.

It is widely seen to be making its first private equity investment in Japan soon, joining most of the rest of the industry in a market that has recently become a magnet for global money.

The recent interest owes to a wave of corporate reform in Japan, long seen as a laggard in governance.

Hitachi President Toshiaki Higashihara has said the company will “set a direction for restructuring our listed subsidiaries by the end of fiscal 2021.”

The number of publicly traded units owned by the industrial conglomerate has plunged since the global financial crisis, from 22 to just two. Of the three subsidiaries once seen as core units, only Hitachi Metals remains, and Hitachi is eyeing its sale as well.

Two former listed subsidiaries — power tool maker Hitachi Koki, now known as Koki Holdings, and Hitachi Kokusai Electric — were acquired by KKR.

KKR is headquartered just one floor below Apollo in the same Billionaires’ Row building on 9 W. 57th Street.


KKR co-founder Henry Kravis had made extended trips to Japan over the past few years, and even this year, as he sought opportunities to visit prospective companies until the last possible moment.

Henry Kravis, co-CEO of the firm, calls Japan a top priority, citing “green shoots” of change. Kravis himself has made extended trips to Japan over the past few years — and even this year, with the coronavirus raging, he sought opportunities to visit until the last possible moment.

The green shoots include a shift in attitudes toward corporate governance, particularly when it comes to parent-child listings — long a symbol of Japan’s lack of progress on this front.

Critics argue that such arrangements give the parent company the power to make decisions at the subsidiary that are in its own interest, to the detriment of minority shareholders. The decline in parent-child listings in recent years is evidence that Japanese business is coming around to the idea of focusing on corporate value.

The shift is taking place through not only sales like Hitachi’s, but also through deals to reclaim profits that had been allowed to flow to outside investors. Nippon Telegraph & Telephone’s takeover this year of wireless subsidiary NTT Docomo, the largest acquisition of 2020, is an example of the latter.

Docomo had slumped to last place among Japan’s big three mobile carriers in terms of revenue. With Prime Minister Yoshihide Suga’s government ratcheting up pressure to cut wireless service rates, NTT President Jun Sawada opted for a 4 trillion yen ($38.7 billion) tender offer — a record for a Japanese company — to bring the subsidiary fully under NTT’s umbrella.

“If we focus on minority shareholders, discussion and decision-making will take more time,” he said.

Joseph Baratta, Blackstone Group’s global head of private equity, likens Japan to Germany in the 2000s. Under then-Chancellor Gerhard Schroeder’s administration, German businesses unwound networks of cross-shareholdings and big companies restructured operations. A similar period of reform is just getting underway in Japan.





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RCB vs KKR: Virat handing new ball to me boosted confidence: Mohd Siraj on ‘magical’ performance


By: PTI |

Updated: October 22, 2020 11:32:48 am





Mohammad Siraz

Royal Challengers Bangalore pacer Mohammed Siraj, who ripped through Kolkata Knight Riders’ top-order with a “magical performance”, said skipper Virat Kohli’s surprise decision to hand him the new ball lifted his confidence in the IPL match here.

Siraj’s first three wickets came without conceding a run as he became the first bowler in IPL history to bowl two maidens in a single game. RCB restricted KKR to a paltry 84/8 and chased down the target in 13.3 overs.

Once Chris Morris generated swing early on, Siraj was asked to bowl the second over following a discussion with wicketkeeper AB de Villiers.

“We hadn’t planned that I would open but when we went out, Virat bhai said ‘Miyan, ready ho jao (Sir, get ready!), you will have to bowl…’ It boosted my confidence,” the Hyderabadi pacer, who returned with figures of 4-2-8-3, said after the eight-wicket win on Wednesday.

“Morris beat the batsmen (in the first over) and then Virat bhai spoke to AB de Villiers (behind the stumps) and gave me the bowl,” he added.

“Initially, I didn’t think it would swing so much after seeing the wicket. I just backed my strength and really enjoyed a lot.”

Brought in the second over, Siraj struck in his third ball with a good length ball that went away of Rahul Tripathi.

In his next delivery, he cleaned up Nitish Rana, with a ball that sharply cut back in and breached the left-hander’s defence. In the next over, he accounted for Tom Banton with another outswing delivery.

His bowling figures became the most economical this season.

A natural in-swing bowler, Siraj has been practising with the new ball and generating outswing in the practice sessions.

“I’ve been a natural inswing bowler but while practising I have started bowling outswing a lot better.

“In our practise sessions, we have Devdutt Padikkal and Parthiv Patel. I bowl the same length to them which I bowled to Nitish Rana. I did the same thing in the game and was able to execute it well,” he said.

Having endured a tough outing against the same side in 2019, it’s now a story of going from being zero to hero for Siraj.

Siraj was hammered for 36 runs in 2.2 overs before being removed from the attack for bowling two beamers as KKR chased down 206 with five balls to spare in their IPL 2019 match.

In the same game, Siraj had also dropped a sitter from Chris Lynn and faced a lot a criticism.

Often sidelined in presence of Chris Morris, Navdeep Saini and the spin duo of Yuzvendra Chahal and Washington Sundar, Siraj got his fourth match on Wednesday when he was included in place of Shahbaz Ahmed.

“I’ve always had a lot of support from the RCB setup. All I wanted to do this year was give a magical performance. I wanted to do something different this year,” Siraj, who played his fourth match of the season, said.

“Whenever I used to think about my performance in the IPL, I had made up my mind that I would deliver a performance to remember. It’s about doing something different, something magical,” he concluded. PTI TAP

Loss against RCB was morale-crushing, but destiny still in our hands: McCullum

Brandon McCULLUM Brandon McCULLUM head coach of KKR and Abhishek Nayar assistant coach of KKR during match 39 of season 13 of the Dream 11 Indian Premier League (IPL) between the Kolkata Knight Riders and the Royal Challengers Bangalore at the Sheikh Zayed Stadium, Abu Dhabi in the United Arab Emirates on the 21st October 2020. (BCCI/IPL)

Disappointed with his team’s “timid approach” with the bat , Kolkata Knight Riders head coach Brendon McCullum has admitted that the crushing defeat against Royal Challengers Bangalore would definitely affect the morale of the side, but their destiny is still in their hands.

He believes KKR can go all the way to the final, despite just hanging on to the fourth spot in the eight-team competition with 10 points from as many games.

“This (loss) is going to affect a little bit in terms of our confidence. We need to work hard on ensuring our morale doesn’t drop at the same time having those honest conversations around how we improve,” McCullum said after the eight-wicket loss to RCB in an IPL game here on Wednesday night.

“But I still firmly believe that we have a side which can be there later on in the tournament, come finals. We just need to improve slightly.

“We’re still fourth in the tournament, which is very fortunate for us. Destiny is still very much in our hands. We have just got to tighten up some of those areas where we’re deficient tonight and make sure we improve on our performance,” he said.

McCullum admitted that they were not good enough and lacked intent in the lop-sided contest against RCB.

Electing to bat, KKR top-order crumbled against Mohammed Siraj’s (3/8) devastating new-ball show to register their second lowest total — 84 for 8, a target which RCB chased down in in 13.3 overs with eight wickets in hand.

McCullum said there was no demon in the pitch but their batsmen lacked intent against some quality RCB bowling.

“…I didn’t think there was a lot in the wicket. Siraj obviously bowled well and (Chris) Morris at times also. But if anything, we were just a little timid in our approach,” the former New Zealand captain said.

“That’s just a bit frustrating because we spoke at length before the game about trying to be positive and show some strong intent, so that’s something we’ll have to address in the next few days.”

Siraj became the first bowler in the history of IPL to bowl two maiden overs as he dismissed Rahul Tripathi (1), Nitish Rana (0) and Tom Banton (10) to virtually kill the contest in the first four overs.

“I just think we weren’t able to enter the game at any stage, none of our top-order batsmen were able to get anything going,” McCullum said.

“Defending 85, you might just win one in 50 games. I think RCB were very good tonight. We’re very poor with bat in hand. You’re not going to win too many games from 40 for 6. But we’ve got to bounce back because we’ve got another game in a few days.

“With the conditions being slightly challenging at times, you’ve got to find a way to still pick yourself up and try and get a result in the next game,” he added.

McCullum said self belief is the need of the hour after such a disappointing performance.

“For us, it’s about maintaining belief. As long as our morale stays high, and our belief within the dressing room stays high, then we have the talent within our setup, the intelligence and quality of players, to be able to go deep in the tournament.”

KKR have four matches left to secure a play-off spot and next face Delhi Capitals here on Saturday.

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KKR spends big and fast to avoid mistakes of last crisis


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With many in private equity taking a cautious approach to acquisitions through the downturn, KKR has spent more than three major rivals combined — Silver Lake Management, Apollo Global Management and Blackstone Group. Silver Lake has been the second-busiest acquirer, with $US5.9 billion in deals during the period, data reveals.

In mid-March, as virus lockdowns came into force, KKR’s infrastructure team acted fast to buy waste-management business Viridor for £4.2 billion ($7.6 billion) from Pennon Group. It was the biggest carve-out at a publicly traded UK company since 2018.

A similar deal was struck in May, when KKR agreed to acquire the Wella and Clairol beauty brands from US cosmetics company Coty in a $US4.3 billion transaction that includes a $US1 billion investment in Coty.

KKR is also one of three firms offering to take control of Spanish phone carrier Masmovil Ibercom for €3 billion ($5.4 billion) in what would be one of the biggest take-privates of the pandemic.

“The best performing vintages in private equity tend to be those that invest during economic downturns,” said Dylan Cox, lead private equity analyst at PitchBook.

By deploying capital in this way, KKR is seen to be following a strategy practiced by renowned investors such as Warren Buffett during the 2008 crash, according to people who have worked with the firm on deals. Buffett backed companies, including General Electric and Goldman Sachs, with billions of dollars at the time – bets that were rewarded when equity markets entered a historic bull-run.

KKR Australia head Scott Bookmyer speaks at The Australian Financial Review business summit in March.Credit:Janie Barrett

“We probably didn’t take enough time to take advantage of lower valuation multiples,” Huth said of KKR’s post-2008 play book.

The firm founded in 1976 by Jerome Kohlberg, Henry Kravis and George Roberts is best known for leveraged buyouts – a reputation immortalised in the 1989 book and subsequent film Barbarians at the Gate, which chronicled its hard-fought takeover of the US tobacco and food company RJR Nabisco.

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KKR closed its latest European private equity fund in November 2019 – a €5.8 billion vehicle. It raised its latest, much larger, North American and Asia private equity funds in 2017, according to its website.

The coronavirus crisis has stifled the world’s financing markets and this, coupled with $US58 billion in uncalled commitments from investors, means KKR has been spurred into writing unusually large equity checks for its recent buying spree.

“I’ve seen this movie before in 2007,” said Huth. “The dislocation of the financing markets may take one or two years. So we finance deals very conservatively, or entirely with equity, and then when markets are back we refinance.”

KKR manages assets of $US207 billion across a range of strategies and is tapping its varied pools of capital to help diversify away from leveraged buyouts.

In April, the firm decided to reboot an unsuccessful credit fund in an effort to scoop up bonds and loans souring amid the crisis. A month later, it said it would use $US1 billion from its third global infrastructure fund to build data centres in Europe.

KKR has also been busy in the public markets, taking stakes in German media company ProSiebenSat.1 Media and food service distributor US Foods. Other deals include a $US1.5 billion investment in Indian digital services group Jio Platforms – its biggest ever in Asia.

“What’s currently happening in public markets isn’t reflecting current value for some companies that we know well, and so we take the strategy of investing in toeholds in a number of companies,” said Huth.

The public markets weren’t kind to KKR during the last crisis, disrupting a planned initial public offering in 2007. Adding to the sting at the time was the fact that rival Blackstone successfully went public prior to the meltdown. KKR eventually listed three years later.

Its share price has fallen 3 [er cent in virus-hit markets this year, giving the firm a market value of $US24 billion. In the first quarter, its private equity portfolio fell 12 per cent as companies became squeezed by the pandemic. One KKR asset that has been struggling is vending machine operator Selecta.

KKR co-president Scott Nuttall said in May: “We find ourselves in the fortunate position of being ready as a firm this time to not only play defence but also playing more offence and we’ve been doing a lot of both.”

The firm has multiple calls throughout the week with COVID-19 point people at the companies in which it invests and has separate teams to keep track of available government support and potential debt repayment issues, according to Huth. Having these measures in place has given KKR the confidence to pursue bold deal-making, he said.

“We are going to continue to invest in this environment,” said Huth. “You have to take that risk but that’s also what our investors give us money for.”

Bloomberg

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