TOKYO -- Bar chain operator Watami announced on Friday a capital and business tie-up with Japan's largest rice wholesaler, aiming to engineer a return to financial health by expanding into family restaurants and bolstering its delivery business.
Kobe-based Shinmei Holding will buy a portion of Watami's treasury stock on Feb. 8 for 1.4 billion yen ($11.7 million). The purchase will give Shinmei a 4.19% stake, making it the fourth-largest shareholder aside from Watami itself.
"We have to work with a variety of companies to strengthen our business," Watami President Kuniaki Shimizu told reporters here Friday. Shinmei President Mitsuo Fujio said he hopes to use Watami's overseas restaurants to boost shipments of Shinmei's Japanese rice. A committee will be set up soon to discuss the details of the tie-up.
By partnering with Shinmei -- a major stakeholder in Genki Sushi, a chain popular among families -- Watami hopes to create a new family-oriented restaurant brand this year. It has taken advantage of capital tie-ups for such purposes in the past, including jointly developing a new bar brand with Suntory Liquors, its second-largest shareholder. Watami will put the proceeds from the stock sale toward bar renovation.
Shinmei supplies more than 500,000 tons of rice a year. It has responded to falling household rice consumption by turning to the restaurant and home-meal replacement industries. It made Genki Sushi a subsidiary in June.
With the Watami partnership, Shinmei hopes to provide a stable supply of name-brand rice to bars and for boxed meals for delivery, as well as market such products as packaged precooked rice. Shinmei's rice brands will also be produced at Watami plants.
With its core bar business flagging, Watami sold its nursing care operations to insurer Sompo Japan Nipponkoa Holdings in December for 21 billion yen. It expects to move into the black this fiscal year with a 13 billion yen net profit, up from a 12.8 billion yen loss in fiscal 2014. But its restaurant operations are still foundering, with same-store sales for the April-December period sinking 7% year on year.