Wendy's Japan aims to re-energize the American fast-food brand in this country under the leadership of a veteran of corporate planning at McDonald's.
Osamu Shiseki, 55, now an adviser to Wendy's, will replace 63-year-old Ernest M. Higa as CEO of Wendy's Japan and subsidiary First Kitchen on Thursday.
Higa will retain representative rights as chairman. Wendy's is looking to integrate its operations with those of First Kitchen to revitalize its flagging business.
The incoming president spent eight years from 1997 at McDonald's Holdings Japan, planning new locations and renovations. In April 2013, he became president of Freshness, the operator of Japanese chain Freshness Burger. He left the company in July 2016 as the company recorded 18 straight months of same-store sales growth.
Wendy's Japan acquired First Kitchen at the end of June this year. The plan going forward is to gradually convert First Kitchen locations, particularly those in central Tokyo areas, into Wendy's-First Kitchen hybrid restaurants.
Longreach invests in Wendy's Japan to build greater synergies with homegrown franchises
Expanding a budget-priced restaurant chain across an expensive real estate market like Japan is not for the faint of heart. Longreach Group, however, has identified a rare inroad into the country's fast-food and fast-casual dining sector through a two-part transaction that gives the firm an immediately scalable platform and a unique niche in this competitive market.
The North Asia-focused GP - which targets buyouts in the range of $30-200 million - is acquiring a majority stake in Wendy's Japan as part of a deal that will see the hamburger restaurant merged with a more locally integrated chain, First Kitchen. A subsidiary of Suntory Holdings, First Kitchen is a hamburger restaurant that diversified into pizza, pasta and fried chicken. Suntory was no longer growing the brand, however, and therefore made the asset available for the Longreach-Wendy's approach.
The plan is to leverage First Kitchen's long-term leases at 136 established locations to create a new play in Japan's restaurant space, fusing the Japan-oriented tastes of First Kitchen with the all-Western offering at Wendy's. This locally sensitive co-branding strategy has already been validated at two "Wendy's First Kitchen" test locations in Tokyo and is expected to be rolled out nationwide in the coming years.
"This is an example of how we are bringing our ‘narrow and deep' international strategy to life by initially focusing on four key markets - Japan, India, Brazil and the Middle East - where we see considerable upside potential over the next few years," says Bob Wright, an executive vice president at Wendy's. "We believe our best approach is to support our franchisees in building Wendy's brand strength in local markets and enhancing the economic model of their restaurants."
Wendy's exited the Japanese market in late 2009, closing 71 restaurants after deciding not to renew its local franchise agreement. When Japan's Higa Industries, the current owner, revived the chain two years later, it planned to expand to 100 outlets. However, high real estate costs, cultural challenges related to the menu, and fierce competition from entrenched hamburger rivals kept this plan in check. Wendy's currently has only one location in Japan.
Higa president Ernie Higa - who brought Domino's Pizza to Japan before its sale to Bain Capital in 2010 - is expected to be a valuable US contact for Longreach as it institutionalizes the leadership bench, deepens execution power and manages exclusive Japanese franchise rights for the global chain.
He will also function as the firm's local partner, after building lines of communication between the deal's various parties, as Wright notes. "This deal would not have been possible without the vision and dedication of Ernie Higa and the Wendy's Japan team, who understand the importance of great customer service, continuous innovation and playing a different game when competing against well-entrenched restaurant competitors."
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The Longreach Group Inc. (‘Longreach’) has agreed to acquire a majority stake of Wendy’s Japan L.L.C. (‘Wendy’s Japan’), a hamburger chain store, at an undisclosed amount. The capital from Longreach will be used for Wendy’s Japan to take over First Kitchen Co., Ltd. (‘First Kitchen’), Japan’s leading hamburger and pasta fast food chain store.
Wendy’s Japan and First Kitchen has opened two “Wendy’s First Kitchen Stores” in Tokyo last year and has been well-received by the public. The capital from Longreach will help to further expand this collaborative effort between Wendy’s Japan and First Kitchen.
North-Asia buyout firm The Longreach Group said on Wednesday it had agreed to buy Wendy’s Japan, the same day that Japan delayed a sales tax hike which would have weighed on consumer spening in the world's third-largest economy.
Using the capital received from Longreach, Wendy’s Japan will buy all of hamburger and pasta fast food chain First Kitchen, a whollyowned subsidiary of beverages conglomerate Suntory Holdings.
The timing of the deal appears to be fortuitous.
Japan's prime minister Shinzo Abe told lawmakers he will delay a planned sales tax hike until 2019. Also one of Wendy's key competitors, McDonald's Japan is struggling to recover in the wake of food-safety scandals. The fast food chain posted its first loss in eleven years in 2015 after a Chinese supplier said it had sold expired meat to companies including McDonald's Japan.
Wendy’s Japan is a franchisee of The Wendy’s Company, the US burger chain, and will have exclusive rights to develop the Japanese market. Wendy’s reentered the Japan market in 2011 after letting the former franchise agreement lapse in 2009, resulting in the closure of 71 restaurants.
Wendy's is looking to bulk up quickly in Japan and the purchase of First Kitchen gives it scale without having to buy up real estate piecemeal. Wendy’s has about 6,500 franchise and company-operated restaurants in the United States and in 28 countries and US territories worldwide. First Kitchen operates 136 stores in Japan.
The deal also marks the first time Suntory has sold to a private equity-controlled company. Longreach has bought assets from blue chip Japanese firms before such as Hitachi, but private equity as an asset class has struggled to gain traction among conservative Japanese managers selling assets.
Food importer Higa Industries acquired 51% of Wendy’s Japan in 2011 and after Longreach's acquisition will retain a minority share.
The president of Higa Industries, Ernest M. Higa, previously built the Domino's Pizza franchise in Japan before selling it to another private equity firm, Bain Capital, in 2010. Bain recently hired former Wendy's International executive, Ralf Alvarez, to head another food chain among its portfolio companies, Skylark.
Longreach has also invested in Japanese fast food chains in the past. It acquired 24.9% of McDonald’s Japan in 2005 from the Fujita family after the passing of Den Fujita.
Wendy’s Japan and First Kitchen are already working together and opened two combined “Wendy’s First Kitchen” stores last year in Tokyo.
Wendy’s Japan has entered into a new and exclusive license agreement with Wendy’s that will enable the expansion of the Wendy’s First Kitchen business in Japan.
Wendy's First Kitchen hopes to compete with the broader appeal of its menu and flexible offerings designed to keep the restaurant busy outside regular meal times.
Longreach has deployed leverage in its acquisition, as debt is relatively cheap and plentiful in Japan's current negative interest rate economy. The private equity firm manages two funds with about $1.4 billion of committed limited partner and co-investment capital.
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The investment will be used to expand the fast food chain’s footprint in Japan.
North Asia focused private equity firm The Longreach Group has acquired a majority stake in fast food chain Wendy’s Japan for an undisclosed amount, the firm said in a statement.
With the acquisition, Wendy’s will combine with Japanese fast food chain First Kitchen, a wholly-owned subsidiary of Suntory Holdings, and will be renamed as Wendy’s First Kitchen.
The deal was structured through Longreach Capital Partners II, a $400 million 2011-vintage vehicle that has received commitments from the Pension Fund Association of Japan, Korea Investment Corporation, Rockefeller Foundation and the University of Michigan, according to PEI Research & Analytics. The fund is almost fully invested, according to a spokesperson from the firm.
The fund follows the strategy of its $750 million predecessor fund, Longreach Capital Partners, which closed in 2006. It focuses on technology, industrial, financial services, and business services and consumer-related investments in Japan and North Asia. Typical deal sizes range from $20 million to over $200 million through fund investments and co-investments.
The Hong Kong-headquartered firm has invested in mobile content provider Cybird Holdings, Taiwanese commercial bank EnTie, aluminium producer Asia Aluminum Group and fast food giant McDonald’s Japan.
In 2012, Longreach sold its investment in SANYO Electric Logistics to warehousing and logistics company Mitsui-Soko, making almost twice its investment in the company.
Longreach manages over $1.4 billion of assets and has offices in Hong Kong, Tokyo and Shanghai. The closing of the deal, which involves 136 restaurants, is expected by the end of June.
TOKYO -- Private-equity fund Longreach Group will buy out Primo Japan, a jewelry store operator, for an estimated 20 billion yen ($167 million), in the hope of opening new outlets in China and other growing Asian markets.
Primo Japan currently runs a network of 76 stores in Japan and 12 overseas shops in such markets as Taiwan and Hong Kong. Group sales came to 15.7 billion yen in the year ended September 2014.
Tokyo-based Longreach will acquire Primo shares from a Hong Kong investment fund, with plans to dispatch a majority of board members. Its post-buyout strategy includes expansion into mainland China, where a solid middle class is growing. At home, it plans to open three or four new stores a year, primarily in the Tokyo metropolitan area. The investment fund will aim to eventually take the jeweler public.
Established in 2003, Longreach has in the past acquired a logistics firm affiliated with the now-defunct Sanyo Electric and a Hitachi subsidiary in the printed-circuit-board business.
After more than 800 days in the market, Longreach Capital Partners 2 reached a final close on September 30. It has been a challenging process that required the target corpus to be scaled back from $750 million to $400 million – but the fund is also largest independent Japan-focused private equity vehicle raised since the global financial crisis.
While Unison Capital Partners III, which closed in August 2009, managed to accumulate A$1.8 billion, the bulk of its commitments came prior to the fallout from the Lehman Brothers bankruptcy. It also predates the full effects of the hangover that followed Japan's 2006-2007 leveraged buyout boom.
"We did face some collateral damage from things that went on in Japan that had nothing to do with our portfolio," Mark Chiba (pictured), group chairman and partner at The Longreach Group, tells AVCJ.
"We have strong conviction that our particular niche in Japan is exciting and differentiated, but general market sentiment has been poor. While it has turned a bit in the last few months, it's still a challenge to attract capital for a Japan strategy."
A number of North American institutions that backed Longreach Capital Partners 1 - a $1 billion vehicle that closed in 2006 - have since retreated from the asset class. According to market sources in the LP community, several US endowments and foundations did re-up, while new entrants include several sovereign wealth funds, including Korea Investment Corporation (KIC), Japan's Pension Fund Association and Pavilion Capital, the North Asia arm of Temasek Holdings.
Though unable to comment on the specifics of his investor roster, Chiba admits that there is a strong appetite for co-investment among some of the LPs. "We realistically have around $700 million in capital to deploy in total, with LPs co-investing on top of the fund size."
Noting that the tough fundraising environment has sucked a lot of the buy-side capital out of the market, Chiba expects to see relatively less competition for assets. Longreach's perceived sweet spot remains corporate carve-outs along the lines of Sanyo Electric Logistics, which was purchased from Sanyo for about $200 million in 2010 and sold to Mitsui-Soko for $300 million earlier this year. Longreach generated a 2.3x return.
Typical targets fall in the category below struggling giants like Renesas, the semiconductor manufacturer that was subject to a takeover bid from KKR - typically non-core assets with an enterprise valuation of $200-400 million, which translates into an equity check of $80-200 million, depending on leverage.
"As industrial Japan reconfigures, attractive businesses become available, but these are not easily accessible deals," Chiba says. "They come through long-term relationships and advisory-type origination. You have to be tied to a multi-year strategy to understand what is there and execute it. Sanyo Electric Logistics was a good example of that approach."
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The Longreach Group has reached a final close of $400 million for its second fund. The private equity firm will continue targeting control investments in Japan and North Asia, with a particular focus on the mature industrial and technology space, financial services, business services and consumer-related sectors.
AVCJ reported last month that Longreach was expected to complete fundraising by the end of September and the fund officially closed on September 30. Longreach Capital Partners 2 has spent more than two years in the market. It held a first close of $135 million in March 2011, and had to scale back its initial overall target of $750 million.
Longreach Capital Partners 1 closed at $750 million in April 2006. Investments include McDonald's Japan, Japanese cable company OCC Corporation, mobile content provider Cybird Holdings, China's Asian Aluminum Group and Taiwan's EnTie Commercial Bank.
Longreach also bought the electronics giant Sanyo's logistics business, and corporate carve outs are expected to remain a key theme in the Japan buyout market.
Many of the North American financial institutions that backed the GP's debut vehicle have since retreated from the asset class, while LPs in general remain wary about making large allocations to Japan funds.
However, a number of Asia-based investors committed to the fund while re-ups were secured from US endowments and foundations, according to sources in the LP community. New entrants include Korea Investment Corporation (KIC), Japan's Pension Fund Association and Pavilion Capital, the North Asia arm of Temasek Holdings.
Given KIC and Temasek's well-known focus on co-investment with portfolio GPs, Longreach's investment strategy and target ticket size are unlikely to change, despite the smaller fund corpus.
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MITSUI-SOKO Co., Ltd. (“Mitsui-Soko”) announces that the board of directors has resolved at a meeting held on February 27, 2012 to enter into an agreement to acquire, as described below, the entire stake in SANYO Electric Logistics Co., Ltd. (“SEL.”)
Mitsui-Soko aims to accelerate further growth and formulated mid-term management plan, “New Growth Strategy @2010,” to achieve this goal. Mitsui-Soko focuses on the development of business which will be a source of future growth, including Third Party Logistics business (3PL.). Mitsui-Soko is also focused on the improvement of service as well as the expansion of their customer base in the Domestic Logistics business via a fundamental shift from conventional methods.
SEL has established a solid operational base in third party logistics in Japan, especially in the consumer electrics retailing sector. SEL also has a platform in IT infrastructure and logistics networks. Mitsui-Soko thinks that the SEL platform, as well as its client-focused IT infrastructure and logistics networks, would enable Mitsui-Soko to strengthen its own logistics platform. SEL has a customer base to end-users with its focus on consumer electronics, and Mitsui-Soko believes that this could bring further growth potential for expanding its customer base with enhancement of end-users distribution channel.
Mitsui-Soko will acquire 100% of 3PL Holdings which owns a 95% stake in SEL, from The Longreach Group, and will acquire the remaining 5% stake in SEL from SANYO Electric Co.,Ltd. and warrants from Chuo Mitsui Private Equity Partners 7 and Chuo Mitsui Private Equity Partners 7 Alpha, which are managed by Chuo Mitsui Capital Company Limited. Upon completion of the acquisition, Mitsui-Soko will, either directly or indirectly, obtain 100% ownership in SEL.
Mr. Tsutomu Asano, current CEO of SEL, and other management will remain in their current positions and aim to provide the best, valuable, high quality services to its clients.
The Longreach Group has reaped an IRR of 60% and a money multiple of around 2.5x on its 24.2 billion yen ($300 million) sale of Japanese logistics company Sanyo Electric Logistics.
The Hong Kong-headquartered private equity firm sold the 95% stake it acquired in July 2010 to Sanyo Logistics' local competitor, Mitsui Soko. Market sources cited the appearance of a willing trade buyer as the reasoning behind the short holding period.
Mitsui Soko, which began as a warehousing company in 1909, purchased the remaining 5% of Sanyo Logistics' equity from its parent company, Sanyo Electric, which was itself acquired by Panasonic in November 2009.
Longreach originally took the logistics subsidiary private 18 months ago. When it was delisted from the JASDAQ board, Sanyo Logistics' total value was estimated at around JPY17.9 billion ($195 million).
Longreach aimed to work with the firm to establish a comprehensive outsourced logistics offering that covered logistics services for sales, production and procurement operations, as well as cultivating an overseas business platform outside of Japan.
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At the 10th AVCJ Asian Private Equity & Venture Capital Awards, presented this evening in an exclusive invitation-only ceremony in Hong Kong, a strong lineup was honored in a total of nine categories, with TPG Capital walking away with three Awards.
TPG Capital won the Private Equity Firm of the Year Award, as well as Trade Sale of the Year for its exit from Singapore's Parkway Holdings. David Bonderman, Founding Partner of TPG, was honored with the Lifetime Achievement Award.
Other industry-leading firms that received Awards were the Carlyle Group with IPO of the Year for their listing of China Pacific Insurance, The Longreach Group with Deal of the Year for the buyout of Sanyo Logistics, CDH Investments Management with Fundraising of the Year for CDH IV, and Sequoia Capital India for Venture Capital Firm of the Year.
Individuals who won Awards this year were Weijian Shan, Group Chairman & CEO of Pacific Alliance Group, who is this year's Private Equity Professional of the Year, and Joe Zhou, Founding Managing Partner of Keytone Ventures, as 2010's Venture Capital Professional of the Year.
Established 10 years ago to recognize excellence in Asian private equity, this year’s AVCJ Awards were chosen by a panel of judges formed from Asia’s leading institutional investors, with input from the private equity industry.
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Asian Venture Capital Journal, Japan eLetter July 2008
Article reports that Longreach Group has exited its investment in OCC Corp in a trade sale, noting that NEC Corp acquired a 75% stake in the company and Sumitomo Electric Industries took a 25% holding. Longreach had acquired OCC in 2006 from the Industrial Revitalization Corporation of Japan (IRCJ).
The article quotes an NEC spokesman as saying that OCC had sales of $165 million in the financial year ended March 2008 and is now in the black.
Article reports on CYBIRD Holdings' announcement that it will conduct an MBO jointly with the acquisition fund Longreach Group. The article highlights the stablishment of a third party committee to assess the appropriateness of the acquisition price, saying this is a first for a listed company and may represent an important precedent.
Article reports on the announcement that EnTie Commercial Bank has agreed to sell as much as a 51 percent stake to the Longreach Group for NT$18.8 billion. The article includes comments from Longreach Chairman Mark Chiba, who said that Longreach seeks mid-size investment targets that enable the firm to take a controlling stake in a strategic partnership with existing management, rather than 100 percent control, and that EnTie matched this profile.
Article says that the Longreach Group has agreed to purchase the stake in Ocean Cable & Communications Corp. (OCC) held by the Industrial Revitalization Corporation of Japan. OCC produces both submarine and onshore communications cables and equipment. The article says OCC's market share in submarine cables is reportedly 80% in Asia and close to
100% in Japan.
Article reports that the Longreach Group paid approximately 75 billion yen ($667.6 million) to acquire almost a quarter of McDonald's Holdings Co. (Japan) Ltd. The article notes that Longreach was to become one of the largest shareholders in the restaurant chain, and said McDonald's Japan welcomed the investment.
Article reports that the Japanese family that founded McDonald's Japan has agreed to sell its stake in the company to the Longreach Group. The article quotes Longreach Chairman Mark Chiba as saying the acquisition had come at an "interesting juncture" in McDonald's Japan's history, and notes that the company has a market capitalization of approximately $2.7 billion and is 50% owned by McDonald's of the U.S.
The first closing of the Longreach Group's inaugural fund is covered in the article, which also looks at the Group's investment and operating strategy and the career history of Mark Chiba, Yaz Miyoshi and Masamichi Yoshizawa.