Carlyle in $229m Japanese restaurant deal

In its second Japanese deal in two weeks, Carlyle has offered to buy Chimney Co., an operator of the Hananomai, Sakanaya Dojo and Kodawariyama restaurant chains.

The Carlyle Group is ready to deploy more of its second Japanese buyout fund, having tendered a ¥20.7 billion ($229 million; €154 million) offer for Tokyo-listed Chimney Co, a restaurant and pub operator.

Assuming Carlyle secures at least 75 percent of the company’s shares, the management buyout will be financed by ¥11.2 billion in loans from Bank of Tokyo-Mitsubishi UFJ, Mizuho Bank and the Development Bank of Japan, according to a regulatory filing.

Chimney operates and also franchises three brands of restaurant/pub chains – Hananomai, Sakanaya Dojo and Kodawariyama. The company has had increasing revenue for the past decade, according to the tender offer. The filing noted, however, that stores have not been meeting monthly sales goals this year and Chimney’s management expects profit to deteriorate for the near term, in part due to a challenging business environment brought on by factors including the financial crisis and increased competition.

Management, as a result, sought a buyout that would enhance shareholder value and give it a partner with operational expertise, the filing said.

Kodawariyam: Carlyle target

Carlyle’s Japanese portfolio does not include restaurants, however, in 2007, Carlyle’s third Asian growth fund bought Shanghai-based restaurant chain Babela, which it characterises as “fast-growing” on its website. It also owns US-based Dunkin’ Brands, parent of the Dunkin’ Donuts and Baskin Robins’ franchises.

In Japan, the firm’s portfolio companies include silicon wafer maker Covalent Materials and auto software company Broadleaf, which it purchased last month for an estimated ¥19.5 billion. Both of those investments were made from Carlyle’s second Japanese buyout fund, which closed on ¥215.6 billion in 2006, more than four times the size of its predecessor.