Bain Capital buys Domino’s Pizza in Japan

Bain Capital announced last week that it would acquire the Japan franchisee of Domino’s Pizza as it sees opportunities in the country’s niche pizza delivery market.

Bain Capital said in a statement that it would buy Japanese firm Higa Industries Co. from Duskin Co., Daiwa SMBC Capital and Ernest Higa, the founder of Higa.

Bain did not disclose the purchase price although Duskin, which owns 44% of Higa, said it was selling its stake for 2.64 billion yen ($29 million), making the entire company worth about $67 million.

The transaction is Bain’s second in Japan in about two months. The firm announced in November the purchase of Bellsystem24, a Japanese telemarketer, for $1 billion from Citigroup Inc.

The buyout firm has obtained loans from Bank of Tokyo Mitsubishi UFJ, the main banking unit of Mitsubishi UFJ Financial Group, for the Higa acquisition.

Bain owns a minority stake in Domino’s Pizza in the United States. Higa Industries operates 179 Domino’s Pizza shops in Japan.

Domino’s Pizza currently only operates in Tokyo and Osaka, Japan’s two largest cities, so there is considerable scope for expansion, according to David Gross-Loh, a managing director at Bain Capital in Tokyo.

“In Japan, pizza delivery is a niche business and home delivered pizza is treated as a specialty item so there is less price sensitivity,” Gross-Loh said.

He said delivered pizza is priced higher in Japan than in the United States and that this boosts opportunities for the development of new products and marketing.

Domino’s Pizza charges 3,900 yen, or $43, for a large pizza with roasted chicken topped with anchovy sauce, according to the company’s website. Even a medium pizza with just cheese and tomato sauce costs about $10. —Junko Fujita, Reuters