Yayoi Draws PE Bidders To Auction

Buyout shops Advantage Partners, Bain Capital and Olympus Capital are among short-listed bidders for Japanese software developer Yayoi, three sources told sister news service Reuters, in a deal that could fetch over $650 million for seller MBK Partners and be perhaps the largest private equity deal in Japan this year. Kohlberg Kravis Roberts & Co., which which also placed a bid, is not among second-round bidders.

Final bids are due in mid-November, the sources said, and MBK plans to complete the deal by the end of the year. The fund has hired Morgan Stanley to manage the sale. Officials at Advantage, Bain, KKR, Morgan Stanley and Olympus Capital declined comment.

Pan-Asia fund MBK acquired Yayoi in 2007 for ¥71 billion ($935 million at current rates), or about 17x EBITDA, at the height of the buyout boom. MBK is unlikely to achieve similar multiples on this deal, with market sources suggesting the asset could fetch 10x EBITDA. Assets in the sector around the world have sold for about 11 to 12.5x EBITDA, but the strong yen could still see MBK make a profit.

Yayoi has an EBITDA of around ¥5 billion, the sources said. MBK is looking to raise about ¥75 billion through the sale of the accounting software firm, the sources said, which would beat The Carlyle Group‘s roughly ¥66 billion purchase of ball bearing maker Tsubaki Nakashima in March.

The sale could attract bidders similar to those that tried to buy Australian software firm MYOB in August. Bain Capital bought MYOB for about A$1.2 billion, beating out KKR and UK software maker Sage Group. Bain’s acquisition of MYOB valued the target around 11.3x EBITDA, comparable to similar recent deals in the sector.

Yayoi’s EBITDA is around 5 billion yen, said the sources. That means if the company is sold at the same multiple as MYOB, it would be valued around 57 billion yen.

In 2010, KKR paid around 12.5x EBITDA for a majority stake in accountancy software vendor Visma, while HG Capital bought Italy’s TeamSystem for 11.3x, UBS said in a research report.

(Wakako Sato is a correspondent for Reuters in Tokyo; additional reporting by Junko Fujita and Stephen Aldred.)