TOKYO Mitsubishi Corp. said Wednesday that it is launching a tender offer worth at least $120.6 million and as much as $267 million to amass a controlling stake in Kentucky Fried Chicken Japan Ltd., which is operator or franchisor of around 1,500 KFC and Pizza Hut units in Japan.
Mitsubishi said it is seeking to double its 31-percent stake in KFC Japan by paying a per-share price of 1,947 yen, about $16.87, for each of the 7.15 million shares in the company that are held by KFC Corp. Holdings Ltd., an arm of Louisville, Ky.-based Yum! Brands Inc. At that per-share price, which represents a 10-percent discount to the average closing price of KFC Japan's stock over the past six months, the Yum-held shares are worth about $120.6 million, but Mitsubishi intends to buy all other shares tendered, up to a budgeted 30.83 billion yen, or about $267 million. It indicated that KFC Corp. had agreed to the discount largely because of the liquidity afforded by the buyout, which Mitsubishi said it pursued to "resolve management issues" stemming from its and Yum's evenly split ownership of more than 60 percent of KFC Japan.
The tender offer, to run through Dec. 7, was approved Wednesday by the board of KFC Japan, which was founded in 1970 as a 50-50 joint venture by Mitsubishi and KFC Corp. They took KFC Japan public in Japan in 1990.
Through the nine months ended Aug. 31, the mostly franchised KFC Japan reported revenues equal to about $564.3 million and operating income of about $25.5 million.
Though Yum would still derive revenues from Japan as a brand licensor, its interests in Asia now are focused in China, where its almost entirely corporate-owned KFC and Pizza Hut system yields more operating profit for Yum than does the mostly franchised U.S. KFC system.