J-Star buys Japan restaurant business

Financial details were not disclosed. The GP invested via its third buyout fund, which targets control and co-control investments in companies with valuations of JPY3-10 billion ($27-89 million), typically writing equity checks of JPY1-3 billion.

Founded in 2005, Echigoya operates two styles of Japanese restaurant, including its namesake line of izakayas – a traditional variety of gastropub – and fast-casual outlets under the name Shinpachi Shokudo. The company currently owns 27 restaurants in the Tokyo area under both brands.

The acquisition follows a demerger that saw Echigoya divest a number of other restaurant assets, including pasta and Korean barbeque chains. According to a statement, Kazuhiro Ebato, president of Echigoya, will continue to lead the J-Star-owned company during an expansion process.

Greg Hara, CEO and managing partner at J-Star, described Echigoya as achieving double-digit EBITDA margins, compared to a range of 7-8% generated by most competitors. The company’s main operational differentiators include expertise in a high-skill chargrilling technique for dried fish known as himono.

The transaction was structured via a separate portfolio holding company called Irohanihoheto. Although J-Star has used a similar platform-based approach to pursue consolidation plays in various segments, Hara indicated that the Echigoya expansion would focus on organic growth.

The izakaya industry in Japan is said to be shrinking due to demographic changes and rising competition from different restaurant business models, but investors have noted potential for growth through professionalization strategies. Recent private equity activity in this space includes Unison Capital’s acquisition of Dinamix, a company with 105 izakaya locations.

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• Topics
• North Asia
• Consumer
• Buyouts
• Japan
• J-Star