PE-Backed Wendy’s Japan Acquires Rival Fast-Food Chain

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The franchisee for the Wendy’s Co. (Nasdaq: WEN) fast-food restaurant chain in Japan, backed by the Longreach Group private equity firm, is acquiring rival chain First Kitchen Limited from Suntory Holdings Limited.

The deal is expected to close in June, with Wendy’s Japan, the franchisee with exclusive rights to develop the Wendy’s business in Japan, buying 100 percent of the equity of First Kitchen and its 136 restaurants.

Wendy’s Japan plans to convert the First Kitchen restaurants into hybrid Wendy’s First Kitchen restaurants and to build more of the combined restaurants over time. The hybrid concept has been tested in Tokyo at two locations that opened in 2015, serving hamburgers, chicken sandwiches and pasta.

Longreach Group, with offices in Tokyo and Hong Kong, provided capital for the deal and is purchasing a majority of the shares in Wendy’s Japan, which is a subsidiary of Higa Industries Co. Inc. Longreach has funds with $1.4 billion of committed capital, with a focus on buyouts in Japan and Greater China in the consumer, mature industrial and technology, financial services and business services sectors. Suntory Holdings, the seller, is a Tokyo-based alcoholic and non-alcoholic beverage maker.

Bob Wright, executive vice president of Wendy’s says that Wendy’s is focusing a “narrow and deep” international development strategy in four markets – Japan, India, Brazil and the Middle East – where the company sees considerable potential in the next few years. Wendy’s has 6,500 restaurants, including company and franchisee-owned locations in the U.S. and 28 other countries.

Recent M&A transactions involving restaurants have ranged from a billion-dollar-plus deal to a one-restaurant purchase agreement with the potential for future development.  Earlier in May, coffee-and-doughnut shop chain Krispy Kreme Doughnuts Inc. (NYSE: KKD) agreed to sell to JAB Beech Inc. for $1.35 billion. In April, Z Capital Partners LLC announced its agreement to buy the Pink Taco restaurant brand, including one of the two Pink Taco restaurants and plans to develop more restaurants and a packaged food and beverage line. In 2015, General Atlantic announced it was making a minority growth investment in Barteca Holdings, owner of wine bar and casual dining chains with a combined 22 restaurants. For more on trends in restaurant deals, see Restaurateur Danny Meyer, of Union Square Café and Shake Shack Fame, Urges Dealmakers to Focus on Hospitality.

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