HONG KONG/TOKYO European private equity firm Permira's PERM.UL is buying Japan's largest sushi restaurant chain, Akindo Sushiro Co Ltd, for $1 billion including debt, in what is set to be the nation's second-biggest buyout deal this year.
The deal shows that despite the country's stagnant economy, investment opportunities into growing companies still exist.
Permira, which struck the deal with Japanese buyout fund Unison Capital to buy Akindo, is already working on plans to expand the company in Japan and to take the chain into China, Permira's co-head of Asia, Alex Emery, told Reuters.
"The company is now in a position to double or triple the number of stores in the next decade," said Emery. "They have three stores in Korea, and they're actively thinking of China and other overseas markets."
Akindo Sushiro is the second large restaurant chain buyout for a global private equity firm in Japan in the last 12 months, after Bain Capital acquired Skylark for $2.1 billion last year.
Earlier this year, Bain paid about $1.3 billion for a 50 percent stake in Jupiter Shop Channel, a television shopping company, making it Japan's top private equity transaction this year.
Emery said sushi was an evolving sector in Japan.
"Sushi in particular is an extremely fragmented sector. The vast majority of sushi restaurants are mom-and-pop type of restaurants, relatively small and actually relatively expensive," Emery said.
Akindo had annual sales of around 100 billion yen in 2011, and has been growing at around 10 percent a year, said Emery.
Akindo Sushiro's family friendly restaurants buck the formal style of Japan's traditional sushi restaurants, Emery said, and its average price per meal of around 1,000 yen is about half the cost of a meal at a mid-range Japanese sushi restaurant.
"This is opening up a whole new segment and what is very attractive for us is the stage of growth Sushiro is in. If you take leading restaurant brands in Japan, they can get to 1,000 restaurants easily, yet Sushiro has only 335 restaurants, so you can say there is strong growth potential."
SUSHI AT PRICE OF PIZZA?
The Permira executive said Akindo management was very keen to roll out stores in Japan and to see where else they can go. "That's where we'll be particularly focused in trying to help them on domestic and overseas expansion."
Like many private equity firms, Permira has increased its emphasis on China, and last year moved Emery, who established its Tokyo office in 2005, to Hong Kong, promoting him to Asia co-head.
Late last year the fund signed a strategic agreement with a unit of state-owned China Development Bank CHDB.UL to help the two parties to pursue private equity investments in China and overseas.
"Sushi is enjoyed in many countries, but it's often an expensive proposition," said Emery on international expansion plans for the chain. "If we can find a formula that allows people to eat sushi for the price of pizza, I think you would see massive demand."
Just under 25 percent of Permira's global revenue comes from Asia investments, which include Macau gaming and hotel business Galaxy Entertainment (0027.HK), Tokyo-based agrochemicals business Arysta LifeScience and Hong Kong-headquartered satellite business Asia Broadcast Satellite.
Founded in 1985, Permira advised funds with $25 billion in committed capital at the end of July.
(Editing by Denny Thomas and Muralikumar Anantharaman)