TOKYO (Reuters) - Two of Japan’s biggest conveyor-belt sushi restaurant chains said on Friday they were joining forces, seeking to take advantage of sushi’s growing popularity to expand overseas as their home market matures.
The parent firm of Genki Sushi Co (9828.T) will buy a one-third stake in Sushiro Global Holdings Ltd (3563.T) - the nation’s biggest conveyor sushi chain - from private equity firm Permira [PERM.UL] for around 38 billion yen ($340 million), and the two chains are in talks to merge operations.
Shares in both firms surged to close 4 percent higher on the deal, although Sushiro’s shares ended some 11 percent below the 4,000 yen price offered by Genki’s parent company Shinmei Co.
The domestic market for conveyor-belt sushi has grown almost 30 percent over five years to be worth 605 billion yen ($5.4 billion) in 2016, according to research firm Fuji Keizai.
But it is also facing many challenges including a rapidly ageing population, rising wages as labour shortages deepen as well as increasingly fierce competition.
“As growth for the sushi restaurant market slows, they can boost sales only by increasing the number of outlets. Those who cannot do that will gradually lose sales,” says Sayaka Azuma, senior food service analyst at research firm NPD Japan.
Sushiro CEO Koichi Mizutome told reporters, however, that the primary reason for teaming up was not the need to tackle rising labour costs but because the firms had set their sights on overseas markets.
Permira bought Sushiro in 2012 from Japanese private equity firm Unison Capital for about 80 billion yen. Sushiro went public earlier this year.
There is little operational overlap for the two firms. Genki Sushi is strong in eastern and northern Japan and has led peers in expanding abroad to locations such as Singapore and Hawaii. Sushiro is centered in western Japan and its overseas operations are limited to South Korea.
Reporting by Junko Fujita and Sam Nussey; Editing by Stephen Coates and Edwina Gibbs