A major shareholder in Doutor Coffee Co. expressed concern Tuesday that the proposal to merge Doutor and Nippon Restaurant System Inc. is flawed because it does not reflect the size of the major coffee chain and the strength of its brand.
Harbinger Capital Partners Master Fund I Ltd. said it believes Doutor has the ability to expand its business significantly without losing its independence in the 50-50 deal.
Doutor has about 1,500 outlets, mainly coffee shops, including franchise stores.
NRS runs a wide variety of restaurants, including Goemon, a chain of pasta restaurants, and Mozart, a cake and cafe chain.
"Based upon the information available to us, we believe the share exchange ratio in the proposed business combination with NRS does not fully account for Doutor's potential and is not in the best interests of Doutor's shareholders, employees and other stakeholders, generally," Eli Benson, Harbinger's vice president and director of investment, said in a written statement.
Harbinger owns 13.8 percent of Doutor's outstanding shares, making it the coffee shop chain's second-largest shareholder. Doutor founder and former President Hiromichi Toba owns about 20.0 percent.
Doutor is asking its shareholders to vote on the proposed business integration at a meeting scheduled for June 28.
The restaurant franchise and Doutor agreed in April in principle to merge through a joint holding company they would establish Oct. 1. The two sides see the tieup as strengthening their market foothold as competition heats up in the food-service sector.
Under the deal, NRS and Doutor would integrate through a 1.687-for-1 share transfer. The merged company would become a wholly owned subsidiary of the joint holding company, which would immediately go public on the Tokyo Stock Exchange.