Endeavour United to buy Pizza Hut Japan

Tokyo-listed KFC – which was established in 1970 as a joint venture between Mitsubishi and KFC Corporation and holds the Japan master franchises for KFC and Pizza Hut – did not disclose the size of the transaction. It said in a filing that the sale was driven by a need to strengthen the Pizza Hut business in the face of intensifying competition in the space.

Pizza Hut was introduced to Japan in 1991 and currently has 370 outlets nationwide. Endeavour said in a statement that there are huge opportunities for take-out services and new store models in addition to the existing Pizza Hut network. It plans to work with the management team to implement growth strategies and improve corporate value.

According to KFC Holdings’ most recent annual report, the Pizza Hut business comprised 159 directly managed stores, mainly in metropolitan areas, at the end of 2016, and 209 franchised stores outside of major cities. It is the third largest pizza chain in the country with an 18.6% market share, trailing Four Seeds and Domino's.

The report notes that Domino's has been expanding aggressively, reaching 459 outlets as of September 2016. Pizza Hut has sought to respond by focusing on outlet locations and introducing take-away only stores under the Pizza Hut Express brand.

Pizza Hut Japan recorded sales of JPY14.3 billion ($125 million) in for the 12 months ended March 2017, down from JPY14.7 billion the previous year. Net income fell from JPY359 million to JPY40 million over the same period; it was JPY1.5 billion in 2015. Phoenix Foods generated sales and net income of JPY579 million and JPY31 million for the 2017 financial year.

Phoenix Capital was established in 2002 and has invested in more than 40 companies. Endeavour was formed as a subsidiary of Phoenix in order to pursue a different investment remit. The first Endeavour United fund closed last year at JPY22.7 billion. Past deals include a tender offer for Palemo, a domestic clothing retailer.

This is the second divestment of an Asia-based Pizza Hut business in the last six months after Yum Brands sold the Australia franchise to Allegro Funds, another turnaround investor. Pizza Hut Australia has also come under pressure in the face of expansion by Domino’s Pizza Enterprises, which serves as the chain’s master franchisor for Australia and New Zealand, Japan, and parts of Europe.

• Tweet  
• Facebook  
• LinkedIn  
• Google plus  
• Save this article  
• Send to  

• Topics
• North Asia
• Buyouts
• Consumer
• Restructuring
• Japan
• Phoenix Capital