(Reuters) — U.S. buyout funds Bain Capital and Cerberus Capital Management sold big stakes in two Japanese companies as the stock market surges – taking profits and avoiding an expected bout of volatility if the U.S. Federal Reserve raises rate later in the year, investors said.
The buyout specialists’ sales came as the market capitalization of shares listed on the Tokyo Stock Exchange’s main board hit a record high last week, surpassing the previous peak hit in December 1989, as Prime Minister Shinzo Abe deployed pro-growth economic policies to boost investor sentiment.
U.S. buyout firm Bain Capital is selling down its 70 percent stake in Japanese restaurant chain Skylark Co to less than half.
Skylark shares closed at 1,685 yen on Tuesday, 40 percent above the 1,200 yen at which Bain sold the stock in an initial public offering last year.
U.S. fund Cerberus last week launched the sale of up to $878 million worth of its shares in rail operator Seibu Holdings
“Recent sell downs of shares held by those buyout funds is a reflection of the surge in Japan’s stock market,” said Soichi Takata, head of private equity at Tokio Marine Asset Management Co. “But buyout firms are also probably mindful of the possible increase in market volatility later this year when U.S. interest rates begin to rise.”
Marunouchi Capital, a smaller buyout operator, sold its entire stake in Japanese toymaker Tomy Co on Monday.
The expected U.S. rate increase may not directly affect the Japanese stocks, but it could cut liquidity and add to market volatility – potentially discouraging investors from buying large blocks of shares, Takata said.
Shares in Seibu, which also runs hotels and develops properties, have more than doubled since they were sold to investors in an initial public offering in April last year.
“It makes sense that Cerberus wants to pick the fruit when it’s ripe. To Cerberus, it was a successful deal,” said Norihiro Fujito, a senior investment strategist at Mitsubishi UFJ Morgan Stanley Securities.
“These private equity funds’ moves are coming at the right time – when the market is surging,” he added.
While there are not many public company shares held by private equity firms in Japan, U.S. buyout fund Carlyle Group owns almost all the shares in ball bearing maker Tsubaki Nakashima Co and the buyout fund could list the shares in the near future after failing in 2012, calling off an initial public offering of the company citing market conditions.
(Editing by Eric Meijer)