The American private equity firm Bain Capital is placing a $ 1 billion bet on the future of nursing homes and dog grooming salons in Japan, through a management buyout which, according to traders , could trigger a boom in asset sales by the founding families.
The offer of the Boston-based investment company to acquire Nichii Gakkan would see the group’s shares delisted from the Tokyo Stock Exchange, with an agreement already in place to buy a 44% stake held by the close survivors of the late founder of the group and family management group assets.
The American private equity firm then offers the remaining shareholders – which includes the Effissimo secret fund – ¥ 1,500 ($ 14) per share, a price that increases last month’s average price by 39%.
Bain’s ability to raise funds for the acquisition of the 51-year-old company, also specializing in dementia facilities and housekeeping services, is a sign that Japanese banks are still ready to finance major operations of redemption at a time when their counterparts elsewhere in the world fell sharply.
To finance the deal, Nichii Gakkan said Bain is investing 27 billion yen ($ 253 million) from its own funds alongside 98.6 billion yen in loans from the three Japanese mega banks – MUFG, Mizuho Financial Group and Sumitomo Mitsui Financial Group – and Nomura Capital Investment.
“Around the world right now, Japan, Korea and – maybe – China are the markets where you can get funding for this type of deal now,” said a person familiar with the deal.
Bain, along with other large private equity groups, has long viewed the Japanese market as rich in trading opportunities. Half of the listed Japanese companies trade below their book value and many of them keep a large number of valuable non-essential assets.
And private equity leaders believe that Japan’s traditionally conservative management teams now seem more willing than before to discuss takeover offers, despite the continued prestige of being a listed company in Japan.
Some overseas investment firms have targeted asset sales of large conglomerates such as Hitachi and Panasonic, while others have focused on capturing small businesses. Bain’s previous deals in Japan include the purchase of a family restaurant chain, the country’s third-largest advertising company, and the acquisition of Toshiba Memory for $ 18 billion in 2018.
People close to the private equity firm said the takeover of Nichii Gakkan indicated a new potential series of deals focused on the recent tightening of Japanese inheritance tax rules.
They added that it was increasingly recognized that a takeover could be the best way for company founders and their families to raise funds through their often large stakes, while avoiding high tax bills.
Nichii Gakkan said Friday that becoming a private company would give him the flexibility to further streamline his troubled operations, led by a management team that took over after the death of its founder and longtime president the year last.
The company ran into trouble in 2017 when a former staff member murdered an 83-year-old resident at his senior’s care facility in Tokyo. While operating profit has tripled since then, as it has significantly reduced its deficit education activities, the company expects labor costs to increase for its nursing homes.