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Bain Capital is launching an unexpected $4.3bn counterbid for IT company Fuji Soft, reigniting Japan’s most fiercely contested takeover battle of the 12 months with a renewed challenge to rival private equity group KKR.
Senior M&A advisers in Tokyo said the move added yet one more twist to a deal that has already tested the boundaries of what private equity is willing to do in Japan and clears the way in which for a proliferation of aggressive dealmaking.
Bain plans to boost its offer price for Fuji Soft to ¥9,600 ($63) a share, in keeping with people acquainted with the matter, topping KKR’s most up-to-date price of ¥9,451 and valuing the corporate at near $4.3bn.
KKR’s bid, which got here in only ¥1 higher than Bain’s previous offer, had put it in pole position after its rival’s first approach was rejected by Fuji Soft’s board in November.
The fight between the 2 foreign private equity groups, which have traditionally avoided overt conflict over Japanese takeover targets, kicked off in August. The deal’s progress, which is being closely watched by firms across the Tokyo Stock Exchange, has pushed Japan into uncharted terrain.
Fuji Soft’s share price rose 1.4 per cent in Tokyo on Wednesday to ¥9,663, in anticipation of the bidding war continuing. A proper announcement of the raised offer, first reported by the Nikkei business day by day, is predicted as soon as Wednesday evening in Tokyo.
The newest offer is about to check Fuji Soft’s appetite for an prolonged bidding war and raises questions on which supply is “friendly”. KKR has the board’s approval, but Bain’s takeover approach has been backed by the corporate’s founder and major shareholder, Hiroshi Nozawa.
“This is unquestionably beginning to flirt with hostile territory, however it’s very clear everyone seems to be attempting to avoid exactly that accusation,” said a senior M&A adviser in Tokyo. “Bain is deliberately positioning itself as a ‘white knight’.”
The brand new offer will come as a disappointment to KKR, which thought it was near clinching a deal. It had already gained control of greater than a 3rd of the corporate’s shares in a previous tender that involved activist funds 3D Investment Partners and Farallon Capital Management selling their stakes.
People acquainted with KKR’s pondering said that they had thought Bain was in a difficult position, partly as a result of the Fuji Soft board’s directive that, having had its offer rejected, the private equity group should destroy confidential information obtained to this point throughout the process.
Bankers and advisers have called Fuji Soft an excellent private equity goal due to inherent value of the business, a priceless real estate portfolio and the presence of two battle-hardened investors within the stock.
It was 3D, the group’s largest shareholder, that proposed the corporate go private and solicited offers for its stake. KKR agreed a cope with 3D and announced a young offer in August, geared toward taking the corporate private at ¥8,800 a share.
Those plans were thrown into disarray when Bain shocked the market by putting out a non-binding proposal, before following up with a binding offer that was 7 per cent higher than KKR’s.
Crucially, KKR’s existing stake has created a blocking position which means Bain cannot win enough shares to initiate a squeeze-out to take control and would face the prospect of deadlock even when it did gain a sizeable holding.
“If that happens, you’d have two significant investors in the corporate who is not going to be aligned on the corporate’s value creation strategy and next steps,” said an individual acquainted with KKR’s pondering. “This deadlocked situation makes any meaningful decision-making difficult and can have a negative impact on Fuji Soft’s business strategy, customers and employees.”
Fuji Soft didn’t immediately reply to requests for comment. KKR and Bain declined to comment.
