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Nomura, CVC in Japan’s largest MBO

Japan’s Nomura Principal Finance and CVC Asia Pacific are participating in the management buyout of a leading family restaurant operator – hailed as Japan’s largest management buyout to date.

The private equity arm of Japanese financial services group Nomura Holdings and buyout firm CVC Asia Pacific have backed the management buyout of Skylark, the largest listed restaurant operator in Japan, in a transaction worth up to $2.4 billion (€1.9 billion). CVC said that the transaction is the largest MBO in Japan to date.

Nomura and CVC formed SNC Investment Co (Nomura with 63.33 percent stake; CVC’s wholly-owned subsidiary Asia Eateries Holdings NV with 36.67 percent) to buy at least 72,472,600 shares at ¥2,500 per share in a tender offer, according to a statement from Nomura. SNC aims to acquire 66.67 percent of Skylark upon the tender close on July 10.

Funds required for the planned shares acquisition of 72,472,600 shares amount to ¥181 billion ($1.6 billion; €1.26 billion), but if the number of shares exceed the number sought by the tender, all the tendered shares will be purchased, thereby raising the maximum amount of funds required to ¥271.9 billion ($2.4 billion; €1.89 billion), according to Nomura.

The offer price represents an approximately 27.4 percent premium to the average share price over six months to June 7, said Nomura.

Skylark’s management is headed by representative director, board chairman and chief executive Kiwamu Yokokawa. Yokokawa is also one of the founders of Skylark, which established its first restaurant in 1970.

Skylark currently operates over 4,400 outlets that include four major brands: Gusto and Jonathan’s, both serving a mix of Western and local cuisines; Yumean (Japanese food); and Chinese restaurant Bamiyan.

The market size of the ‘dining-out’ industry has shrunk to approximately ¥25 trillion from a peak of ¥30 trillion in 1997, according to Nomura. The downturn, combined with the opening of new restaurants operated by chain store-oriented companies and expansion of home meal replacement markets (Nakashoku) have intensified competition in all of the food services industry.

If the tender offer is successful, Skylark will be de-listed from the Tokyo Stock Exchange. SNC plans to acquire all the outstanding shares of Skylark, which in turn will become a wholly-owned subsidiary of SNC.