Bain exits Japan hot spring operator to Lone Star
Bain Capital has sold Ooedo Onsen Monogatari Resorts & Hotels, a Japan-based traditional inn and hot spring chain operator it acquired nearly seven years ago, to Lone Star for an undisclosed sum.
The private equity firm first launched a sale process in late 2019 for the business. However, this was aborted due to reduced occupancy brought on by COVID-19 and uncertainty over a contract extension at its best-known site in Tokyo Bay, Mergermarket, AVCJ’s sister title, previously reported.
The process was relaunched in August 2021, with a reported asking price of around JPY 110bn (USD 953m). According to Mergermarket, Ooedo Onsen was still losing money, but business was stabilizing, and the company had forecast EBITDA of JPY 8bn-9bn for the following financial year. The closure of the Tokyo Bay site, on the artificial island of Odaiba, was announced two months earlier.
Bain paid JPY 50bn for Ooedo Onsen in 2015, which at the time had 29 spas and resorts. It spent three years cultivating what was described as a succession planning opportunity. The company – founded in the 1980s by Hiroshi Hashimoto as a sideline to his circuit board manufacturing business – bought up several rivals in the 1990s as economic conditions became more challenging.
Bain sought to continue this consolidation effort. David Gross-Loh, a managing director at the private equity firm, told AVCJ at the time that there were hundreds of potential acquisitions. There were also plans to tap the international tourist market.
According to a statement, it has improved the new site opening strategy and optimized marketing, purchasing, and cost management. As of September 2021, Ooedo Onsen operated 34 spa hotels, two hot spring theme parks, one non-residential spring facility, and one amusement park. The latter was the Odaiba facility, which opened in 2003 as Japan’s first onsen-themed amusement park.
Headcount was nearly 1,300 and sales for the 12 months ended February 2021 were JPY 20.8bn.
In 2016, the company spun out minority interests 14 facilities into a real estate investment trust. The portfolio comprises 1,369 rooms with a cumulative acquisition value of JPY 36.1bn as of May 2021.
Lone Star, which has raised USD 85bn across 22 funds since 1995, has substantial exposure to Japan’s leisure and hospitality space, including golf courses and hotels. Recent portfolio additions include Unizo Holdings, which was acquired in 2020 at a valuation of USD 205bn. Lone Star emerged as a white knight investor after the hotel operator was subject to a hostile takeover bid.
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