Carlyle seeks to buy Christmas in Japan with KFC bid

Carlyle Group has launched a bid to buy the Japanese operations of KFC — the fast-food chain that, through a 50-year-old quirk of fate and branding, has become synonymous with Christmas in Asia’s second-biggest economy.

The US-based private equity fund said it was planning an “aggressive” strategy of new store openings for KFC in Japan, a country where the entire fast-food industry has been forced to adapt to an ageing and shrinking population and radically changing diets.

KFC, along with McDonald’s, Burger King and others, have also had to compete with the increasingly extensive food offerings at Japan’s three largest convenience store chains, each of which now sells fried chicken at their counters, and many of which provide tables in store for customers.

Carlyle’s tender offer places a 20 per cent premium on the Tokyo-listed shares of KFC Holdings Japan, and values the company at about $910mn, based on its closing market capitalisation on Monday. The tender period will last from May 22 until July 9.

The fast-food chain operates about 1,200 stores in Japan, where its first branch opened in 1970 as a joint venture between the US-based KFC parent and giant trading house Mitsubishi Corporation.

Shortly after that first opening, the manager of the original branch in Japan hit on the idea of presenting its signature bucket of fried chicken pieces as the must-have meal at Christmas — a ploy that arose from an overheard conversation between foreign customers who suggested that its fare was enough like turkey to deliver a festive hit.

The campaign worked so well that, half a century later, the KFC bucket is, for many in Japan, synonymous with Christmas. Its popularity is so embedded that many branches require customers to book their bucket in advance to avoid yuletide disappointment.

Carlyle’s take-private tender offer is being made by its wholly owned subsidiary, Crispy Holdings, and follows several months of competing bids for the 35 per cent stake in KFC Japan that Mitsubishi is selling.

Mitsubishi’s decision to sell its stake in KFC comes as Japanese companies of all sizes are coming under pressure to focus more tightly on their capital efficiency and their holdings in non-core businesses. Mitsubishi’s sale of its KFC stake was part of a broader reshuffle of its portfolio, which it said was being undertaken in response to the evolving business landscape of an ageing country.

The stake sale attracted a number of potential buyers, which included Colowide, the Japanese company that runs some of the country’s largest sushi, beef barbecue and burger chains.

Carlyle emerged as the favourite bidder, however, adding another deal to the growing list of buyouts by foreign private equity firms that now see Japan as the most attractive market outside the US.

As the stake sale has progressed, KFC’s share price has risen 75 per cent since the start of 2024, after four years of largely flat trading.

According to people familiar with Carlyle’s plans, the private equity firm believes there is more value to be unlocked by opening more branches in Japan’s largest metropolitan centres, and that the entire store network could improve on its use of location.