
Bain to sell Domino’s Japan for $123m
Bain Capital will sell a 75% stake in Domino’s Pizza Japan (DPJ) to Australia-listed Domino’s Pizza Enterprises (DPE) for JPY12 billion ($123.4 million). The buyer will provide JPY9 billion of new debt funding, implying an enterprise value for the whole business of JPY25 billion.
Bain will retain 25% of the Japan business, bought in 2010 for a reported JPY6 billion ($66.5 million then) with leverage provided by Bank of Tokyo Mitsubishi UFJ.
DPJ operates under a 20 year Master Franchise Agreement with Domino's Pizza, expiring on 31 March 2031, with an option to extend for a further 10 years. DPE already holds Domino's master franchise rights for Australia, New Zealand, France, Belgium, the Netherlands, and Monaco.
DPJ generated pro-forma revenue of approximately JPY22.3 billion and pro-forma EBITDA of around JPY2.48 billion for the financial year to 31 March 2013.
Since Bain bought the master franchisee, it has grown from 173 stores to 259, comprising 216 corporate stores and 43 franchise stores as at 30 June 2013. It remains the third largest pizza delivery chain in Japan. The existing senior management team led by executive Scott Oelkers will remain with DPJ in order to continue the growth of the business to a long term target of 600 stores.
The deal gives Bain an option to exit its remaining minority stake to DPE three years from completion of the acquisition, at 17.5 times the price/earnings multiple. DPE also has the option to buy the stake for the same price.
David Gross-Loh, Managing Director at Bain Capital said the firm welcomed the opportunity to partner with Domino's Pizza Enterprises to continue to grow the business. "We have significantly grown sales and increased the footprint of Domino's Japan since investment in 2010, and this new partnership will enable Domino's Pizza Japan to continue to develop its brand and consumer base," he said.
Bain expanded the chain beyond Japan's two largest cities of Tokyo and Osaka by opening stores in Nagoya, Kobe, Kyoto, Fukuoka and Sendai and planned to further penetrate second-tier urban centers. According to company research, the number of new customers coming to Domino's Japan has grown from around 120,000 a month to more than 160,000.
DPE plans to roll-out new stores into existing and new territories in Japan, relocate existing stores and increase the number of franchise stores.
DPE will fund the acquisition by raising A$156 million from an offer of 5 new shares for every 23 DPE shares, priced at A$10.20 per share. The offer price represents a 12.6% discount to the dividend adjusted closing price on the last trading day before the announcement.
The acquisition is expected to be completed before the end of September 2013.
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