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UPDATE 2-Japan's Colowide says it's won fast-food fight to take over rival Ootoya

(Updates with Colowide announcement, shareholder’s comment)

TOKYO, Sept 8 (Reuters) - Japanese fast-food group Colowide said it had succeeded in a hostile takeover of Ootoya , after offering a generous premium to persuade investors to set aside fears that a deal would hurt the home-style dining chain’s food quality.

Colowide, which owns several large fast-food chains, said it had amassed a stake of around 47% in Ootoya including the 19% it previously owned, effectively gaining control of its smaller rival.

Ootoya did not respond to requests for comment.

The battle between the two fast-food groups was closely followed across Japan as hostile deals are still rare in the country’s traditionally consensus-driven business culture, and because Ootoya is a household name.

Ootoya specialises in traditional Japanese fare such as fried cod and grilled vegetables in a black vinegar sauce, served with miso soup and rice.

Colowide offered to buy the shares at 3,081 yen each, a 46% premium to their price before the tender offer was launched. Yet it initially struggled to persuade Ootoya shareholders, around 60% of whom are small “mom-and-pop” investors, and extended its tender offer deadline last month.

Colowide has said it wants to promote more efficiency by linking Ootoya to its network of central kitchens, a key component of fast-food chains seeking to maximise economies of scale.

Ootoya has said such a system would reduce the quality of its food and its appeal to customers.

Chiharu Morikawa, a 32-year-old in central Japan, was one of the Ootoya shareholders who turned down the offer as she feared a shift to a central kitchen would mean its food would lose its freshness and just-cooked appeal.

“It’s really like eating at home, the food is freshly made,” said Morikawa, who has been eating at Ootoya for the past decade and became a shareholder five years ago. “It obviously hasn’t been sitting around.”

Colowide’s successful deal suggests, however, that other investors were more open to persuasion due to fears of a prolonged COVID-19 pandemic, which has kept some customers away.

Ootoya had also been facing rising labour and food costs, which weighed on financial results and prompted some price hikes, although most of its meals still cost well under $10.

Colowide first acquired a stake in Ootoya after the sudden, death of Ootoya’s founder Hisami Mitsumori in 2015 prompted a boardroom battle and the exit of his son, Tomohito, from the company. Tomohito and his mother eventually sold their shares to Colowide.

$1 = 106.2500 yen Reporting by Ritsuko Ando and Eimi Yamamitsu; Additional reporting by Junko Fujita; Editing by David Dolan, Susan Fenton and Pravin Char

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