TOKYO U.S. private equity firm Bain Capital is close to finalizing a $3.4 billion deal to buy restaurant chain Skylark from a unit of Nomura Holdings (8604.T), a source with knowledge of the matter said, in the largest buyout in Japan since the financial crisis.
The roughly 260 billion yen ($3.4 billion) deal is expected to give a small boost to Nomura's earnings while allowing Japan's top broker to shrink risk assets to meet new global capital regulations to be introduced over the next few years.
It would also mark a rare big deal in Japan's private equity market where transactions have dried up after the country's devastating March 11 earthquake prompted many domestic funds to turn a cautious eye to fresh deals.
"The big international players are still interested in deals, but they get fewer deals done than the domestic players (which) are much less active this year than they were at most points in the last decade," said Kenneth Siegel, who heads the Tokyo office of law firm Morrison & Foerster.
Bain and Nomura Principal Finance are hammering out final details and aim for an agreement by the end of this month, in time for Nomura Holdings' July-September quarter earnings announcement on November 1, the source said, speaking on condition of anonymity because the deal is not public.
Nomura Holdings said in a statement that it has not made any announcements regarding the reported sale of its Skylark stake. Officials at Bain and Skylark declined to comment on the negotiations.
Bain and Nomura began talks on Skylark last year. Negotiations were put on hold after the March earthquake and delayed again in August after an outbreak of dysentery traced to outlets of Skylark's Gusto restaurant chain.
While there was speculation that Nomura may have to accept a smaller payday due to the setbacks, in dollar terms the $3.4 billion price tag is the same as in March prior to the quake when the two sides were close to clinching a deal.
A spokesman for Skylark, which operates about 3,600 stores in Japan including the Bamiyan Chinese and Jonathan's family restaurant chains, said groupwide revenues were running above last year's level despite the hit to Gusto's sales.
Nomura Principal originally invested in Skylark in 2006 through a management buyout with another private equity firm. It currently controls a 77.8 percent stake in the restaurant chain along with other investors with money in a Nomura fund.
The Skylark sale is the latest move by Nomura to shrink the holdings of its merchant banking arm. Earlier this year it agreed to sell ball bearing maker Tsubaki Nakashima Co to Carlyle Group CYL.UL for about $800 million.
The next two big private equity assets in focus are the roughly 120 billion yen holding in regional lender Ashikaga Bank and 120 billion yen held by London-based Terra Firma, Deutsche Securities analyst Masao Muraki said.
"Nomura is moving in line with other global financial institutions looking to cope with Basel and liquidity regulations," he said. "Going forward the focus is on whether Nomura can reduce its remaining private equity holdings."
Muraki estimates Nomura will book a 39.1 billion yen loss for July-September quarter when it reports on November 1.
Nomura is expected to book a gain on the sale of its Skylark stake, which it has marked down in the past. It is unclear in which quarter the broker would reflect that gain in its earnings.
(Reporting by Emi Emoto and Nathan Layne; Editing by Chris Gallagher)