The ¥270 billion MBO and delisting from the TSE (2006)

A trade in control and time

To close unprofitable branches and rework a structure weighted toward large stores without being chased by the quarterly share price, the company needed to step away from the market’s gaze for a while. It was a trade: time to rebuild the store network, bought in exchange for the status of a listed company. That President Yokokawa Kiwamu set relisting five years out, and attached conditions keeping authority over personnel and asset disposals in his own hands, looks like a line drawn to buy the time only, without surrendering control of the management. The price of more than ¥270 billion — among the largest in Japan — was in part the price of that control.

But in a structure that leaned on Nomura and CVC for ¥150 billion of the funding, control could not be secured by conditions alone. In 2008, when it became clear results would fall short of plan, the funds that had become the large shareholders demanded Yokokawa’s resignation on grounds of poor performance, and the founding family withdrew from the management it had held since Kotobuki Shokuhin. The time that had been bought was used for a rebuild carried out after the family had gone, and the consolidation of the store network began in earnest from there. How far conditions written to protect control hold up against the balance of power with the providers of capital is what this episode shows.