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Two of the world’s largest private equity firms, KKR and Bain, have engaged in an all-out battle for a $4 billion Japanese software company, as Tokyo’s M&A market enters a new phase. into unexplored territory.
The fight, which has been going on for more than a year, entered a new phase on Friday after Fuji Soft’s board decided to maintain support for KKR’s long-shot bid of 8,800 yen, or $59. , one share – but refused to completely reject Bain’s offer. the more recent offer and the 7% increase it has set.
“We believe that Bain Capital’s proposal is a sincere one and will continue to consider it,” Fuji Soft’s board of directors said.
The board’s qualified support for KKR comes after a public intervention earlier this week from Fuji Soft founder and major shareholder Hiroshi Nozawa, who called Bain a ‘knight’. white’ and called on his opponent to step aside.
A straightforward competition between two private equity firms of this size is unprecedented in Japan, analysts and traders said. Companies and the assets they hold are often not valued as if there is a market for corporate control.
“Investors had a choice between two offers, one higher than the other but both from extremely experienced PE firms,” said a person familiar with the situation. “Fuji Soft stockholders will have to explain to their investors, if they bid at a lower price, exactly why they made that choice. The competition itself is testing important new platforms.”
Fuji Soft is an ideal private equity investment target, given what people familiar with the matter say could be a real estate portfolio worth nearly $1 billion. Another factor is the presence of two seasoned investors investing in the stock – 3D Investment Partners and Farallon Capital Management, both of whom played key roles in the years-long battle for control. control Toshiba.
Fuji Soft, which sells cloud software and digital systems, has been in the lurch since Singapore-based fund 3D, the company’s largest shareholder, proposed the company go private, launch the auction process and attract private equity firms.
KKR, on Friday said it was pleased to receive the continued support of Fuji Soft, having first agreed a deal with 3D and then announced a tender offer in August this year, aiming to The goal is to make the company private.
Those plans were thrown into disarray when Bain made a non-binding proposal in September, sending Fuji Soft shares surging and shocking the market.
In response, KKR accelerated the bidding and forking process, the first part of which involved 3D and Farallon Capital agreeing to sell their shares. That means, as things stand, KKR controls 32.7% of the shares.
The second half of KKR’s tender offer will run from late October to late November, at the same price and allowing shareholders time to evaluate Bain’s move. It also has a requirement to have a sufficient number of shares to trigger a mandatory short squeeze.
Last week, however, Bain once again put things in doubt by following up on its initially tentative proposal with a binding takeover offer for Fuji Soft at ¥9,450 a share . Bain’s bid would value the group at $4.2 billion, compared with nearly $4 billion for KKR.
The company is currently trading at 9,660 yen, above both offer prices, which some bankers and analysts say shows confidence in an escalating bidding war.
Bain, which said in a statement that it “continues to support Fuji Soft as a white knight for the company’s management and founder,” shows no signs of backing down, despite the board’s announcement admin Friday.
However, despite the optimism about the share price, other bankers poured cold water on the idea of another higher price, as the shares KKR acquired were in fact a large position. blocking position.
A Tokyo-based banker familiar with the deal said: “The Japanese market is ready for this kind of battle between PE firms, but no one will risk their reputation becoming hostile”.
3D declined to comment. Farallon did not immediately respond to a request for comment.
