UPDATE 1-Advantage Partners set to buy GST AutoLeather

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By Alison Tudor, Asia Private Equity Correspondent

HONG KONG, April 9 (Reuters) - Private equity firm Advantage Partners said on Wednesday it will buy U.S.-based GST AutoLeather, its first solo buyout outside of Japan.

The Japanese fund beat out global buyout company the Carlyle Group [CYL.UL], sources with direct knowledge of the matter said.

GST provides leather upholstery for car interiors for many of the world's major automotive original equipment manufacturers, including Toyota Motor Corp (7203.T), Honda Motors Co (7267.T), General Motors GM.N and Chrysler [CBS.UL].

Advantage Partners plans to support the company's market expansion strategies, including its pursuit of the fast growing China automotive market.

"We believe GST AutoLeather has significant growth potential in the key markets in which it currently competes, as well as in newer markets such as China and the rest of Asia," said Richard Folsom, one of Advantage Partners' co-founders in a statement.

GST AutoLeather is owned by SILLC Holdings LLC, a holding company set up by private equity and venture capital firm Court Square Capital Partners, formerly known as Citigroup Venture Capital.

Citigroup Venture Capital acquired the Michigan-headquartered firm from U.S. Industries in 2000 when it bought U.S. Industries Inc's diversified businesses segment for $660 million.

At the time, GST AutoLeather was the largest of 11 businesses in the unit.

ADVANTAGE EXPANDS

This is Advantage Partners first buyout outside of its home turf and it illustrates the firm's global ambitions.

The company bought Mars Inc's subsidiary payment processing firm MEI Conlux in 2006, which had dual headquarters in the United States and Japan, but this was together with Bain Capital.

Advantage recently opened its first office outside Japan in Hong Kong and the six-strong team will be instrumental in helping GST to boost its presence initially in China and later in the rest of Asia.

GST AutoLeather has the second-largest market share in China. Advantage Partners expects to help the company boost sales and marketing in the Middle Kingdom, said Yotaro Tokuo, a senior associate at the private equity firm.

Goldman Sachs Japan Co Ltd acted as financial adviser to Advantage Partners. Lazard Freres & Co LLC acted as financial adviser to SILLC Holdings LLC.

The buyout of GST is a leveraged transaction which financial sources said would partly be financed by ING Bank and GE Commercial Finance.

(Editing by Anne Marie Roantree)