PE to buy Japanese restaurant chain

The deal size could reach JPY280 billion ($3 billion), including debt. Industry sources said that the negotiations between Bain and Nomura are apparently in the final stages. For the secondary deal, local lenders including Mitsubishi UFJ Financial Group, Mizuho Financial Group, Sumitomo Mitsui Financial Group and Shinsei Bank are said to be in talks to provide a total of JPY150 billion ($1.8 billion) in loans to Bain, according to Reuters.

Nomura Principal originally invested in Skylark in 2006 through an MBO alongside UK private equity firm CVC Capital Partners for around JPY380 billion ($3.19 billion at historical rates) to take 77.76% and 20.96% respectively. It was one of the highest priced investments by a private equity firm in Japan. Mizuho Bank supported the buyout deal, providing JPY220 billion ($1.84 billion) in loans for the MBO.

Later in 2009, Chuo Mitsui Capital, a PE group wholly owned by Chuo Mitsui Trust Holdings, took over CVC's stake when the Skylark's profits went back to black ($2.1 billion after a previous of -$5.4 billion). The transaction was made under the condition of exchange of funds which Chuo Mistui loaned to CVC. Chuo Mitsui makes private equity investments and mezzanine loans, which it had provided to CVC.

Tokyo-based Skylark Co. was founded by the Yokokawa family in1970 as the pioneer of family targeted restaurant, taking its cue from the American diner model and prompting ‘like-named' restaurants Denies and the Jonathan. Syklark currently operates 3,399 restaurants under 48 different brands name, including Kozo Sushi Chain and Gusto.

When Skylark was bought, the EV was estimated at around JPY380 billion while EBITDA was JPY400 billion. After the investor group paid around JPY380 billion with support of management, executives were let go and the restructuring has largely failed due to price increases of ingredients that were affected by surging oil prices. Nomura was forced to inject another JPY50 billion into the restaurant chain in December 2008.

Industry source told AVCJ that the sale was being made post a decision to restructure Nomura's investment operations. Another source said that Nomura was about to exit Skylark after five years, but that the deal does not sound like it would produce decent returns for Nomura.

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• Topics
• Buyouts
• North Asia
• Bain Capital Asia
• CVC Capital Partners