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Friday, June 9, 2006
Skylark to carry out largest MBO in Japan history
Family-style restaurant chain Skylark Co. announced Thursday its management will buy all outstanding company shares to become private, making it the largest management buyout bid in Japanese history.
Skylark officials said they decided on the move, expected to cost roughly 272 billion yen, so it can restructure without worrying about the effect on stock prices. Observers said it would also eliminate the possibility of a takeover during the process.
The plan was approved by the firm's board of directors in the afternoon. Skylark will launch a public tender bid Friday until July 10 for 2,500 yen per share through SNC Investment Co., funded by Nomura Principal Finance Co. and Asia Eateries Holdings NV.
The company, listed on the Tokyo Stock Exchange's first section, has some 4,600 eateries at home and abroad, including the Gusto, Bamiyan and Jonathan's chains.
Skylark is expected to be delisted in September, company officials said.
"I decided that it would be difficult to gain support from stockholders with various values and carry out drastic reforms at the same time," Skylark Chairman and CEO Kiwamu Yokokawa told a news conference.
Yokokawa said he hopes the firm will rebuild itself within the next five years, adding that going public again in the future "is one option."
"Skylark has run family-style restaurants for the past 35 years, but this (business) format is becoming obsolete," he said. "We have to think of a different model."
He said the company will consider streamlining its various eatery brands and introduce restaurants with menus in a higher price range. Yokokawa also noted he will consider shifting emphasis from part-time employees to full-time ones to provide higher quality service.
"This will need a lot of investment, which is likely to put us in the red for a while," Yokokawa said.
Skylark's stock price surged 290 yen to 2,365 yen Thursday on reports of the MBO.
After the public tender bid ends, Skylark management, the two investment firms and possibly employees will invest in SNC Investment.
Drastic changes in a firm can cause its stock to plummet, making it vulnerable to a hostile takeover. To protect themselves, an increasing number of companies are choosing to go private before making big changes.
Last year, major apparel manufacturer World Co. launched an MBO that cost 208 billion yen, while soft drink maker Pokka Corp. also went private through an MBO with the financial support of an investment firm.
The family-style restaurant market has seen year-on-year sales decline on a same-restaurant basis since 1997, according to the Japan Food Service Association.