TOKYO Nomura Holdings Inc (8604.T) is in talks to sell Japanese restaurant chain Skylark Co to U.S. private equity firm Bain Capital LLC for 280 billion yen ($3.4 billion) including debt, sources told Reuters on Friday.
If the deal goes through at that price it would be one of the largest private-equity purchases of a Japanese company, and highlight a pick-up in activity in the country's traditionally slow and difficult buyout market.
The negotiations are in their final stages and the hope is that the deal will be completed by the end of the month, the sources said, speaking on condition of anonymity because the talks have not been made public.
Nomura spokeswoman Joey Wu declined to comment on the deal which was first reported by the Nikkei newspaper.
Nomura's buyout unit, Nomura Principal Finance, has been unloading portfolio companies, agreeing to sell ball bearing maker Tsubaki Nakashima Co to Carlyle Group CYL.UL for about $800 million earlier this month.
Nomura Principal originally invested in Skylark in 2006 through a management buyout with UK private equity firm CVC Capital Partners, and it currently controls a 77.8 percent stake in the restaurant chain along with other investors with money in a Nomura fund.
CVC gave a stake to a private equity fund owned by Chuo Mitsui Trust Holdings (8309.T) in 2009 in return for not having to pay back loans made to purchase the stake. Chuo Mitsui currently owns 20.2 percent.
For the potential sale to Bain, banks including Mitsubishi Financial UFJ (8306.T), Mizuho Financial Group (8411.T), Sumitomo Mitsui Financial Group (8316.T) and Shinsei Bank (8303.T) are in talks to provide about 150 billion yen in loans to finance the deal, sources said.
This would be Bain's second major Japan buyout after its deal to buy bellsystems24 two years ago.
Global private equity firms have struggled to source deals in Japan. The value of transactions by private equity firms in Japan, which peaked in 2007 at $22.5 billion, fell to $3.2 billion last year, according to Thomson Reuters data.
Individual deal sizes have also shrunk, making it even harder for global firms, which dwarf most of their local rivals, to invest funds in the world's third-largest economy.
In 2007, the average transaction was worth $73 million based on Thomson Reuters data, while in 2010 that figure dropped to $19 million.
Market experts have also blamed resistance to foreign capital by management and shareholders for the dearth of deals, with many large Japanese companies reluctant to go through drastic restructuring by selling non-core businesses.
Foreign firms have therefore adopted a softer approach, promising to support management and help improve profitability. Japanese firms eager to expand overseas as sales at home dwindle have also become more receptive to courting by private equity.
(Additional reporting Tim Kelly; Writing by James Topham; Editing by Michael Flaherty and Nathan Layne)