Bain gets Domino’s takeaway

Japan’s oldest pizza delivery chain operator, and Domino’s master franchise in the country, was hitherto owned by Matsuo Ernest Higa, who held a 12% stake; Duskin Co., a listed company engaged in activities including dust control product rental services, as well as food services such as Dunkin Donuts, which held 44%; and Daiwa SMBC Capital, a direct investment arm of Daiwa Securities Group, which also held a 44% stake. Daiwa SMBC originally acquired a 67% stake in the company in 2002, and later partially sold this to Duskin in 2006.

Although the financial terms of the deal were not disclosed, industry sources noted that the company would be valued at about ￥6 billion ($66.5 million), adding that Duskin reportedly said it was selling its stake for ￥2.64 billion ($29 million). The deal will be leveraged solely by Bank of Tokyo Mitsubishi UFJ.

Domino’s Pizza Japan, which currently operates 173 shops nationwide with a particular focus on Tokyo and Osaka, first opened in Ebisu, a high-end residential area of Tokyo, in 1985, when Higa acquired the Japan operating license from the US headquarters. Other pizza business competitors are Pizza-La and Pizza Hut, with Domino’s Pizza positioned as the third largest operator in Japan. 

David Gross-Loh, managing director at Bain Capital in Tokyo, confirmed to AVCJ that the deal was not an auction deal. .  He said that the opportunity developed out of a long-time relationship between Higa and a Bain Capital managing director in Japan.  “Mr. Higa was familiar with our successful track record in supporting Domino’s Pizza as well as a number of other food services and restaurant companies, and felt we would be a logical buyer,” explained Gross-Loh. Bain Capital acquired a majority stake in Domino's Pizza of the US in 1998. Domino's Pizza Inc. went public in 2004 and Bain still retains partial shares of the company.true

Upon the completion of the acquisition, the current CEO will retire from the business. According to Gross-Loh, Bain Capital will be searching for a new CEO, for which the firm will look both to internal or external candidates. “Higa Industries is a well established business. We will provide management with advice and operational help throughout the company’s next phase of development.” stated Gross-Loh. 

“Pizza delivery service in Japan is growing as a result of high internet and mobile penetration, making ordering online easy for consumers and spurring online sales,” said Gross-Loh adding that Domino’s Japan has started using toll-free order services, which has become a key strength of its business model. The company’s current online orders are said to make up about 35-40 % of Domino’s total sales in Japan. The company last year upgraded its software systems by adopting a new PC server platform from Fujitsu to cover all its outlets in order to lower operational costs, reducing electrical consumption by some 50%.

Gross-Loh said that Domino’s Japan will look to expand its operations, with new store openings not only in the two key cities where the company dominates the sector, Tokyo and Osaka, but also in other major cities across Japan.

“Building market share for Domino’s via the internet, new product development, enhancing the company’s operational efficiency and driving customer satisfaction will be a key focus for us moving forward, and will help Domino’s to differentiate itself in the market,” added Gross-Loh.

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• Topics
• Buyouts
• North Asia
• Consumer
• David Gross-Loh
• Bain Capital Asia
• Daiwa SMBC Capital Asia Limited