Restaurant chain operator Colowide Co. said Wednesday it had raised its stake in struggling dining chain Ootoya Holdings Co. to 46.77 percent as part of a hostile takeover bid.
Colowide, which runs a wide range of Japanese-style pubs and restaurants including the Gyu-Kaku grilled beef eatery, has said it plans to immediately send new directors to Ootoya after an extraordinary shareholders' meeting, in hopes of turning around the business' fortunes, after launching the takeover bid in July and extending it in late August.
The tender successfully ended Tuesday, Colowide said, after the firm received enough offers from Ootoya shareholders to raise its stake in the set-menu eatery above the targeted lower limit of 40 percent.
Colowide offered ¥3,081 per share — a 46 percent premium on the Ootoya stock price, which had closed at ¥2,113 on July 8, the day before the tender offer was announced.
"The result of the takeover bid is very disappointing," an Ootoya official said, adding, "We will do our best for our customers and employees."
The izakaya pub operator plans to replace more than half of the Ootoya board, permitting some of the current members to remain if the two companies reach an agreement on the partial reshuffle.
If talks break down, Colowide intends to propose a completely new board at Ootoya's extraordinary shareholders' meeting, sources close to the matter said.
The new owner has said it plans to improve Ootoya's profitability by sharing its food processing and logistics facilities, as well as by conducting joint procurement and distribution.
Colowide had initially planned to accumulate a stake of at least 45 percent in Ootoya in the tender offer through Aug. 25, but it extended the deadline to Tuesday and revised the lower limit downward to 40 percent to increase the possibility of a successful takeover bid.
Colowide has said a 40 percent stake is expected to be enough to reshuffle Ootoya's directors, as less than an 80 percent voting right has been exercised at Ootoya's recent shareholders meetings.
Before the takeover bid, Colowide held a 19.16 percent stake in Ootoya after obtaining shares last year from Mieko Mitsumori, the widow of Ootoya founder Hisami Mitsumori, who died in 2015, and their eldest son, Tomohito.
In June, Colowide proposed a plan to reshuffle Ootoya directors but it was rejected at a general shareholders meeting.
Ootoya had opposed the hostile takeover by Colowide and asked its shareholders not to sell their shares to the restaurant operator, while Colowide said Ootoya's menu was too pricey for its customer base.
Ootoya has said it takes pride in offering what it calls healthy "mom's food" cooked on site at each restaurant, and that Colowide's method of distributing prepared meals from its central kitchens to its outlets would "clearly lower" the quality of food.
The two companies have both been eager to expand their businesses in overseas markets. As of the end of March, Colowide operated 227 overseas outlets in 12 countries and regions including the United States and Taiwan, while Ootoya ran 116 restaurants overseas in countries including Thailand, Vietnam and Indonesia.
The novel coronavirus outbreak has hit the restaurant operators hard, with Ootoya posting a net loss of ¥1.51 billion in the April to June quarter on sales of ¥3.16 billion, down 48.1 percent from a year earlier.
Colowide reported a net loss of ¥5.40 billion in the same period on sales of ¥30.48 billion, down 48.4 percent from the previous year.
On Tuesday, shares in Ootoya fell ¥144 to close at ¥2,810 on the Jasdaq, having hovered near ¥3,000 over the past two weeks.