Bain, CVC in Running for Japanese Supermarket Chain

Bain Capital, CVC Capital Partners, and financial firm Orix Corp. have been short-listed as bidders for Japanese supermarket chain Seijo Ishii Ltd, Reuters reported. The company, which has been valued at roughly 30 billion yen ($358 million), is owned by buyout shop Advantage Partners. Final bids are due early next year, Reuters said.

(Reuters) – Private equity funds Bain Capital and CVC Capital Partners, as well as financial firm Orix Corp are among short-listed bidders for a Japanese supermarket chain, six people with direct knowledge of the deal said.

Three lending sources said they value Seijo Ishii Ltd at around 30 billion yen ($358 million) but add the seller Rex Holdings, owned by Japanese private equity firm Advantage Partners Inc, is asking for more and the deal may not materialise.

Orix has submitted the highest bid so far at between 35-40 billion yen, said one banking source. A source at one of the private equity funds said Rex was asking for more than 40 billion yen.

Marunouchi Capital Co, a joint venture between Mitsubishi Corp and Mitsubishi UFJ Securities Holdings Co Ltd, is also bidding, the sources said.

The first round of bids were submitted last month. The bidders may team up with non-financial firms for the final bids that are due early next year, the sources said, asking not to be identified because the process is not public.

The auction process was restarted after a failed attempt in late 2009.

Representatives for Orix and Advantage Partners declined to comment.

Seijo Ishii’s annual EBITDA (earnings before interest, tax, depreciation and amortization) is around 4 billion yen ($47.8 million).

Lenders are looking at 15 billion-20 billion yen in debt financing to support a potential buyout.

Credit Suisse, which is the existing mezzanine investor, and Shinsei Bank are preparing a stapled financing, while large Japanese banks are talking to the bidders on potential debt financing, said three lending sources, who are not at large Japanese banks.

Supermarket businesses generally provide thin margins and banks tend to be cautious on lending to the sector, one of the sources said. Shinsei Bank is the sell-side adviser.

In 2009, Rex sold convenience store operator am/pm Japan Co Ltd to FamilyMart Co Ltd for 12 billion yen. Rex also has a restaurant chain, REINS International Inc. In 2006, Advantage Partners secured a 93 billion yen management buyout loan for Rex. ($1=83.72 Yen) (Editing by Edwina Gibbs)