July 18, 2019 / 1:04 PM / a month ago

UPDATE 1-Bain Capital in talks on new Japan buyout fund -source

(Adds Bain representative declining to comment)

By Junko Fujita

TOKYO, July 18 (Reuters) - Global private-equity firm Bain Capital LLC is in early talks with investors to set up a new fund targeting mid-sized Japanese companies, a person with knowledge of the matter said.

The fund would come as Japanese companies face pressure to maximise corporate returns following a push for better governance led by Prime Minister Shinzo Abe.

The person spoke on condition of anonymity because the discussions are still private. Bain's plan was earlier reported by Bloomberg.

A Bain Capital representative declined to comment.

Bain Capital this year attempted a management buy-out of printing firm Kosaido Co, worth about 17 billion yen ($158 million). Its shares were trading below book value, despite a stake in a lucrative crematorium business.

The bid, although later blocked by a fund backed by Japanese activist investor Yoshiaki Murakami, appeared to signal Bain's renewed focus on smaller firms in Japan.

Bain's Japanese track record already includes investments in smaller firms, such as spa operator Ooedo Onsen Monogatari Hotels & Resorts Co, mushroom producer Yukiguni Maitake Co and the Japanese franchisee of Domino's Pizza.

It also led an $18 billion investment in Toshiba Memory, the world's second-largest maker of NAND memory chips, which was spun off from Toshiba Corp last year.

Bain Capital in December raised its largest Asia-focused fund, worth $4.65 billion.

Since the introduction of a corporate governance code in 2015, Japanese companies have become more open to calls from investors to change their strategies and boost shareholder return.

That could lead to more management buyouts, where managers take companies private to focus on improving performance, and opportunities for buyout firms to fund such deals. ($1 = 107.7200 yen) (Reporting by Junko Fujita; Editing by David Dolan/ Christopher Cushing and Emelia Sithole-Matarise)

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