Bain serves up $123m Japan exit

The private equity giant has sold a 75% holding in Domino’s Pizza Japan to Domino’s Australia after significant operational improvements on the business.

Global private equity firm Bain Capital has sold a 75 percent stake in Domino’s Pizza Japan for JPY 12 billion (€92 million; $123 million), according to a company statement. 

The buyer, Australia-based Domino’s Pizza Enterprises is also providing JPY 9 billion in new debt funding, valuing the business at JPY 25 billion.

“[Japan's] macro-economic picture is improving, consumer sentiment is getting better and there are a lot of high hopes around the Abe government and what it is able to accomplish,” David Gross-Loh, managing director at Bain, told Private Equity International.

“I think that is relative to a pretty slow past five years. It's an improving environment [for exits].”

Bain will retain a 25 percent stake in the business, with some minority voting rights with regard to operating control. The firm has an agreement with Domino’s outlining clear defined exit rights that also provide the buyer with the ability to obtain full ownership of the Japan branch at a future date. Bain cannot exit its remaining stake for the next three years. 

Having invested in Domino’s in the US and Japan, as well as acquiring Japan's Skylark restaurants for $2.1 billion in October 2011, Bain is familiar with investing in the country’s food and beverage sector. 

It acquired Domino’s Japan in 2010 for an undisclosed amount. Media reports estimated the enterprise value at JPY 5 billion.

The macro-economic picture is improving, consumer sentiment is getting better and there are a lot of high hopes around the Abe government and what it is able to accomplish. I think that is relative to a pretty slow past five years. It is an improving environment [for private equity]

David Gross-Loh, managing director, Bain Capital Japan

Since then, the firm implemented a number of operational changes including reducing purchasing costs, lowering pizza prices, adding take-away services and expanding its geographical footprint, according to Gross-Loh.

In 2010, the business had 175 stores in Tokyo and Osaka, which has grown to 259 stores in Japan today. 

Bain was approached by Domino’s Australia about the sale. “We’ve known Domino’s Australia in the past, they expressed interest and put forward an attractive proposal so we pushed ahead with it,” Gross-Loh said.

Several firms have exited Japan investments this year. In March, Kohlberg Kravis Roberts exited Japanese recruitment services provider Intelligence in a $720 million sale.

Earlier this year, Advantage Partners sold coffee shop franchise Komeda Coffee to MBK Partners at an 7x multiple and in a particularly outsized deal sold condominium management group Community One to a corporate buyer, reaping a multiple of 22x, PEI reported earlier.