Tokyo, July 3 - Japan's Yamazaki Baking Co. said on Monday it would spend about $159 million to buy nearly all of rival Tohato Inc., making it the second-largest snack and confectionery maker in Japan.
Yamazaki said it would buy a 53.1 percent stake from Unison Capital, a Japan-based private equity firm, and the rest from toy and entertainment firm Namco Bandai Holdings Inc. and trading house Marubeni Corp.
The deal will boost Yamazaki's share of Japan's snack and confectionery market to about 11 percent, putting it ahead of the current No. 2 player Koikeya and No. 3 Meiji Seika Kaisha Ltd., according to the Nihon Keizai Shimbun.
The biggest player is Calbee Foods with a 38 percent share.
Yamazaki said it would pay about 17.2 billion yen ($150 million) to buy 95 percent of Tohato on July 19 and would then make it into a unit. Japan's top baker will also pay another 1 billion yen ($8.73 million) to acquire share warrants.
Unison, the former Bandai Co. and Marubeni bought Tohato's snack business in 2003 after Tohato applied for court protection from creditors, weighed down by ill-fated investments in golf courses during Japan's bubble economy which burst in the early 1990s.
The consortium bought the stake for 18.3 billion yen ($159.7 million) including preferred equity and senior debt, after raising their bid from 13.2 billion yen ($115.2 million) to secure the deal, according to a financial source.
Unison invested 4.1 billion yen ($35.78 million) in the common equity at the time, the private equity firm's Web site said. The sale to Yamazaki will yield Unison about 8.8 billion yen ($76.81 million) for its 53.1 percent stake.
Namco Bandai, which will run its stake down to 5 percent from 37.7 percent, raised its group net profit forecast for the six months to September by 32 percent to 9.0 billion yen ($78.55 million) due to profits from the stock sale.
Namco Bandai will book proceeds worth 5.4 billion yen ($47.13 million) from the sale.
Namco Bandai's shares rose 0.69 percent to 1,727 yen on Monday. After an initial rally on the news, Yamazaki's shares ceded ground and ended trade 2.24 percent lower at 1,002 yen. Marubeni rose 1.48 percent at 619 yen.
The benchmark Nikkei average rose 0.43 percent.
Sales at Tohato have recovered in recent years, rising 18 percent to 18 billion yen in the business year to March 2005 and then climbing to 19 billion yen in 2005/06, although hefty goodwill amortisation costs have left it mired in the red.
Yamazaki Baking had about 738 billion yen group revenues in calendar 2005, mostly from bread products.
Of that, the company's snack unit Yamazaki Nabisco Co. generated about 30 billion yen in sales. It handles Chip Star potato chips, Ritz crackers and Oreo cookies.
By joining forces with Tohato, whose products include Caramel Corn and a variety of other chips and cracker snacks, Yamazaki said it could leverage its size to lower costs.
"In addition to being able to cooperate on joint procurement of raw materials and in distribution, this deal should expand our business scope," Yamazaki Baking President Nobuhiro Iijima told a news conference.