Japan Systems was a subsidiary of DXC Technology and a JASDAQ listed public company prior to Longreach’s investment. The company is a system integrator and is engaged in three businesses. The Enterprise business provides system integration services to multiple sectors such as financial, telecom and energy. The Public sector business provides to municipalities its own proprietary accounting software, “FAST”, and related system engineering services. The NetCam Systems business provides its own proprietary (i) mammography viewer software and (ii) video management system software for network cameras.

Corporate Divestiture, Going Private, and Cross Cultural Solutions. Non-core subsidiary divestment from a US IT conglomerate, DXC Technology. The investment opportunity was developed exclusively, given Longreach’ global team capabilities and our track record in carve-outs as well as tender offer transactions, along with our track record in value creation with portfolio companies in the business service sector. 100% of voting rights are held by LRG while DXC co-invested 21% through a pension fund LP.

• Management upgrade including new CEO
• Corporate governance enhancement through committee-based organizational structure
• Revenue expansion and unit price improvement through various strategic initiatives
• Cost reduction opportunities through business process re-engineering and streamlining indirect costs
• Scale-up through aggressive acquisition of engineers and add-on M&A
• Product portfolio expansion through R&D and M&A
  

First Kitchen, a subsidiary of Suntory, operates and franchises a QSR chain in Japan providing hamburger, pasta, french-fries, salad and dessert. It operates approximately 130 directly owned and franchise stores in Japan.

Corporate Divestiture and Cross Cultural Solutions. Longreach acquired 100% of First Kitchen from Suntory together with becoming the sole Japan franchisee for Wendy’s, in combination to create the new “Wendy’s First Kitchen” QSR chain and growth strategy.

• Core growth strategy of converting the FK stores into WFK stores, creating platform for restaurant footprint growth while structurally increasing revenues and margins
• Installment of KIOSKs, development of smartphone applications and branding/promotion to enhance user experience
• Leverage brand value and promote differentiated product development and marketing strategy
• Improve operations and service levels as well as enhance cost efficiencies and reduce food loss rate
• New C-Suite management team (CEO, CFO) with deep industry expertise
• Enhanced corporate governance and culture, including new KPIs and performance aligned HR evaluation/compensation

Founded as a joint venture between McDonald’s Corporation and Den Fujita in 1971.  Japan’s largest fast food restaurant chain with JPY 395 bn of revenues and over 3,700 stores, publicly listed at c. JPY 300bn market cap in July 2005, when business restructuring was in process under the new CEO to improve low growth and margins.  Then owned by the McDonald’s Corporation (49.99%), Fujita family (26.91%) and public shareholders (23.10%).

Founder Succession and Cross Cultural Solutions. Fujita family seeking exit but their shares represented 18 months trading volume - highly illiquid stock with high valuation. McDonald’s Corporation wished to facilitate the Fujita exit while keeping the McDonald’s Japan turnaround focus on track. Control buyout impossible given McDonald’s strategic shareholding requirement, and vanilla equity investment impossible given high valuation and lack of liquidity. Through exclusive negotiations with McDonald’s and the Fujita family, Longreach developed a unique structured minority investment approach that solved for the deal constraints and generated high returns, enabling the investment in July 2005.

• Longreach devised embedded exit structure to allow for minority investment

• ~Fully financed and hedged share acquisition through mandatory exchangeable note placement with entry price into the stock at deep discount to market price
• ~Combined up-front distribution and further distributions realized through profit share structure, reflecting strong turnaround of the McDonald’s Japan business

• All parties achieved objectives

• ~Fujita family realized complete exit with full liquidity
• ~McDonald’s achieved stable shareholding transition to support business turnaround
• ~Longreach secured outstanding investment return and built valuable relationships