Bain pursues $374m acquisition of Japan pharmacy business

The private equity firm is looking to buy 9.66 million shares for JPY3,500 apiece, which represents 39% premium to the September 9 closing price. As of early afternoon trading on September 14, the stock was at JPY3,515. Shareholders representing at least 5.88 million shares must vote in favor of the tender for the deal to proceed, according to a filing.

Tadayuki Teranishi, the chairman of Kirindo who opened the first pharmacy in Osaka in 1955, Toyohiko Teranishi, the company’s CEO, and Kouyu, an asset management business owned by the Teranishi family, have agreed not to sell the bulk of their shares. They currently own 15.9% of the company. However, two other family members, Toshiyuki Teranishi and Yukiko Kaneko, who represent 7.6%, will be exiting.

Once the tender offer is completed, the company will be restructured so that Bain owns 60% while Tadayuki and Toyohiko Teranishi, plus another family member, Hiroyuki Teranishi, hold 40%. MUFG Bank, Aozora Bank, and Sumitomo Mitsui Banking Corporation have agreed to provide JPY27.3 billion in debt financing for the deal.

Kirindo sells pharmaceuticals, health food, cosmetics, childcare goods, and general merchandise through approximately 370 pharmacies. The company – which is less profitable than its industry peers – has set targets around boosting digital sales, strengthening its health and beauty business, renovating stores, and increasing the number of prescription-dispensing stores. It is working on opening 100 new stores, of which 60 will offer prescription services.

While demand is expected to grow in line with Japan’s aging population, Kirindo wants to position itself for industry reorganization and consolidation. Bain will help grow the business nationally by widening the store network, increasing sales through more attractive shop floors and better product selection, and leveraging technology to create a leaner and more efficient business. Developing own-brand products and M&A are among the priorities.

Kirindo generated JPY133.3 billion in sales for the 12 months ended March, up from JPY129.6 billion a year earlier. Net profit rose from JPY1.47 billion to JPY1.79 billion.

Recent deals in the pharmacy space include a Polaris Capital Group-led tender offer for Sogo Medical worth JPY76.3 billion. Sogo is a broader business than Kirindo, with interests including a B2B healthcare management platform. It opted to work with private equity in response to a changing commercial environment, notably the increasing burden Japan’s aging population is placing on healthcare services.

Bain has been working on several other tender offers of its own, closing a JPY122 billion acquisition of Tokyo-listed aged care provider Nichii Gakkan, despite a last-minute intervention by Baring Private Equity Asia. It also bought Showa Aircraft Industries, a Japanese manufacturer that specializes in paneling for aircraft interiors, at a valuation of JPY90 billion. Meanwhile, the firm is working on a partial exit from mushroom producer Yukiguni Maitake via an IPO.

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• Topics
• North Asia
• Buyouts
• Healthcare
• Consumer
• Japan
• Bain Capital Asia