Information on the Target

Advantage Advisors, Inc. (hereinafter referred to as 'the Company') has announced that a special purpose vehicle funded by its AA Fund has agreed to underwrite convertible bonds with stock acquisition rights issued by Sanmarc Holdings, Inc. (hereinafter referred to as 'Sanmarc HD') through third-party allocation. Additionally, the Company has entered into a business partnership agreement with Sanmarc HD to enhance the accuracy of its existing brand outlet standards, develop new brands and business formats (including M&A), reduce indirect costs, improve Quality, Service, and Cleanliness (QSC), and leverage digital transformation solutions to enhance customer attraction and operational efficiency at individual stores, as well as support human resource acquisition.

Industry Overview in Japan

Sanmarc HD operates in the highly competitive Japanese food service industry, offering a wide range of dining experiences through its various brands, including 'Bakery Restaurant Sanmarc', 'Sanmarc Cafe', 'Sushi Restaurant Hakodate Market', and more. The company has seven consolidated subsidiaries and aims to create a comprehensive dining service network across the country.

The food service sector in Japan has faced significant challenges due to shifts in consumer behavior amid the COVID-19 pandemic and the rising competitiveness of the takeout and home meal sectors. These factors have intensified competition and placed pressure on traditional dining establishments to innovate their business models while improving service quality.

In response to these evolving market conditions, Sanmarc HD has formulated a new medium-term management plan, beginning in fiscal year 2022, aimed at reinvigorating its growth trajectory. The company acknowledges the need to build a robust management foundation that can swiftly adapt to environmental changes to overcome low profitability and declining sales per location.

With an increasing focus on enhancing customer satisfaction through diverse quality, ambiance, and service offerings, Sanmarc HD is positioned to capitalize on its unique business model and respond effectively to the ongoing challenges within the food service industry.

The Rationale Behind the Deal

The partnership with Advantage Advisors is strategic for Sanmarc HD as it seeks to rejuvenate its growth and operational effectiveness. By aligning with Advantage Advisors, the company aims to refine its brand standards, develop innovative business formats, and enhance its operational efficiencies while navigating the current market's competitive pressures.

Furthermore, the collaboration intends to leverage the digital transformation solutions provided by NTT DoCoMo, a strategic partner within the AA Fund, to optimize customer engagement and improve operational processes in individual stores.

Information about the Investor

Advantage Advisors is a prominent investment firm known for providing strategic growth support and capital solutions to companies in diverse sectors. With expertise in enhancing business operations and driving profitability, the firm is dedicated to helping its portfolio companies realize their full potential.

By investing in enterprises like Sanmarc HD, Advantage Advisors demonstrates its commitment to fostering innovation and operational excellence, thereby creating significant value for stakeholders in the long term.

View of Dealert

The investment in Sanmarc HD through the AA Fund by Advantage Advisors is poised to be a potentially sound investment. The food service industry in Japan is experiencing a transformative phase due to the impact of the pandemic, and companies that can adapt quickly stand to benefit considerably. Sanmarc HD's proactive approach to refining its business model and enhancing customer satisfaction is commendable.

Moreover, the collaboration with Advantage Advisors, particularly in utilizing digital transformation strategies, can provide Sanmarc HD with the necessary tools to optimize operations and attract a broader customer base. This adaptability could lead to improved financial performance in a recovering market.

Over the medium to long term, if Sanmarc HD successfully implements the strategies laid out in the partnership, we can anticipate a return to a growth trajectory. The combined expertise in operational efficiency and strategic development positions both companies favorably within their markets.

Overall, this partnership represents a strategic alignment of resources and expertise with the potential for significant positive outcomes in addressing current industry challenges and achieving sustainable growth.

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