Advantage Partner's Portfolio Company Rex To Be Taken By Colowide Via DES

Rex Holding Co, the holding company of several restaurant chains and a portfolio company of Advantage Partners, will become majority-owned by Colowide Co. (7616), the parent firm of several chains of Japanese-style pubs. Currently Rex is 32% owned by its founder and at least 55% owned by the funds advised by Advantage Partners.

Last Friday, Colowide announced that it will acquire a 66.6% stake of Rex through a debt-equity swap. Colowide has agreed to purchase outstanding bank loans from the lenders for JPY 13.7 billion (USD 175 million). While the total notional of the loans purchased was not disclosed, it should occupy a substantial part of Rex's USD 800 million liability (as of Dec 2012).

Aggressive business expansion in early-mid 2000s has caused Rex to suffer from heavy interest payments. Since Advantage funds acquired approx. 90% of the company in December 2006, Rex has been restructuring its business by selling convenience store chain operator am/pm in 2009, Red Robster in 2012 and super market chain Seijo Ishii in 2012. While the liability on its B/S was reduced by approx. USD 640 million between 2011 and 2012,  apparently it was not enough for the company to turn around. The sale of Seijo brought USD 215 million profit to Rex turning its pre-tax profit into black in 2012 , while the sale of am/pm in 2009 caused USD 95 million loss, according to Colowide's press release.

Advantage paid approx. JPY 7 billion to delist Rex from Tokyo stock exchange in December 2006. This deal will certainly pull down the performance of Advantage III fund eating up a portion of the large profit realized by the sale of Pokka Corp. last year.