TOKYO -- Japanese restaurant operator Colowide said Tuesday its bid to take control of local rival Ootoya Holdings has been successful.
Colowide said its stake of about 19% in Ootoya together with commitments from other holders of another 27% meant that it now has control of about 47% of the company. This exceeds the minimum level of 40% needed to ensure the bid's success.
The move marks the first successful hostile takeover in the Japanese restaurant industry, potentially setting an example for others to follow in a sector that has been ravaged by the COVID-19 pandemic.
Ootoya, known for its freshly made set meals, had faced pressure from top shareholder Colowide to prepare food in central kitchens, a proposal meant to improve efficiency. The disagreement led to the hostile bid.
"This is a very disappointing result," an Ootoya spokesperson said when asked to comment. "Going forward, we will do what is best for our customers and employees."
Ootoya is expected to remain listed. Colowide will request an extraordinary shareholders meeting in early November, where it intends to take a majority of seats on Ootoya's board.
Under international accounting rules, which Colowide follows, the company can make Ooyota a consolidated subsidiary without majority ownership as long as it exercises de facto management control.
Colowide, whose chains include Kappa Sushi and Gyu-Kaku barbecue restaurants, keeps costs low through mass purchasing of ingredients and the use of central kitchens. Colowide is expected to maintain Ootoya's policy of serving freshly made food while reviewing steps that can be streamlined, such as procurement of ingredients from within the group.
Colowide's acquisition strategy "also has the aim of boosting efficiency across its entire group, helping provide stability to earnings," said Seiichiro Samejima, an analyst at the Ichiyoshi Research Institute in Tokyo.
Japan's restaurant industry is made up of many small and midsize operators that generally have low operational efficiency. The success of Colowide's takeover bid could signal the start of a spree of mergers and acquisitions in the industry, analysts said.
The restaurant group posted a 6.4 billion yen ($60.4 million) net loss for the year ended in March. Ootoya booked a net loss of 1.15 billion yen ($10.8 million), its first loss since it made its debut on the Tokyo Stock Exchange in August 2001.
Colowide launched a public tender offer on July 10 at an offer price of 3,081 yen ($29) per share, representing a 46% premium to the last close. As the tender offer deadline approached on Tuesday morning, applications to accept the offer amounted to about 27%.
Colowide initially made an unsuccessful merger offer to Ootoya last November. Colowide then proposed a motion to replace Ootoya's management team, but the proposal was voted down at an annual general shareholders' meeting in June.
Ootoya expressed opposition to Colowide's tender offer, saying that the "existing management team, which has been endorsed by shareholders, will carry out business reforms." However, shareholders were drawn to the 46% premium, allowing Colowide to proceed with its plans.