KKR-Bain standoff tests Japan’s buyout patience
04/02/2025 03:27
(The author is a Reuters Breakingviews columnist. The opinions
expressed are his own.)
By Hudson Lockett
HONG KONG, Feb 4 (Reuters Breakingviews) - Missteps were
inevitable in Japan’s fledgling M&A trade as foreign investors
and listed companies work out best practices. But the slow grind
between U.S. private equity rivals KKR KKR.N and Bain Capital
for Fuji Soft 9749.T , a $4 billion IT firm with chunky real
estate assets, is anathema to Tokyo’s desire for efficient
value-creating deals. The longer it drags on, the more it risks
damaging foreign investors' reputations.
The last six months have seen a preponderance of left feet
and crushed toes. The first surprise came from Bain in
September, when it floated a non-binding offer, about 5% above a
binding one from KKR of 8,880 yen per share. Bain cast itself as
a white knight and conditioned its promises to firm up a bid on
a recommendation from Fuji Soft’s board.
Fuji Soft's special committee demurred and stuck by KKR, who
took the unusual move of splitting its tender offer into two
successive parts. That allowed it to snap up a 34% stake from
activist investors including 3D Investment Partners, who first
solicited buyout offers in 2023.
The plan was perhaps too clever by half, however. KKR bagged
enough shares to block any rival takeover but is left holding a
minority stake in a publicly listed company, a position through
which it can't add much value. KKR subsequently raised both
parts of its offer to 9,451 yen. Nonetheless, unconvinced
investors have forced the buyout firm to extend the second
tender offer three times, with the latest ending on Feb. 7. KKR
even asked Fuji Soft to file an injunction against Bain, which
expects to launch its bid at 9,600 yen this month even without
management's support.
For now, the share price continues to hover above the offer
prices but there is also a time value to money. Japanese
regulators ought to consider how they can hasten M&A proceedings
and whether introducing something akin to the UK's "put up or
shut up rule" might help to give targets more certainty. It was
only a decade ago that foreign private equity groups were seen
as vultures, and one protracted messy deal could be a setback
for everybody.
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CONTEXT NEWS
U.S. private equity group KKR on Jan. 24 extended the
deadline for the second stage of a tender offer to take control
of Fuji Soft, a Japanese software services company.
The extension until Feb. 7 was the third in just over a
month and left KKR’s offer price unchanged at 9,451 yen per
share, below the stock’s latest close of 9,800 yen. The offer
values the company's equity at $4.1 billion. KKR picked up its
existing 34% stake in Fuji Soft in the first tender offer, which
closed in November.
Rival Bain Capital announced on Dec. 18 that it would pursue
a take-private of Fuji Soft at 9,600 yen per share even without
management's support. The two buyout firms have been sparring
over the company since KKR first announced its binding offer at
8,800 per share in August.
Activist 3D Investment Partners kicked off a sale process
for Fuji Soft roughly a year earlier by soliciting take-private
proposals and submitting them to the company's board.
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Graphic: Fuji Soft buyout drama grows long in the tooth https://reut.rs/3ExwazK
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(Editing by Una Galani and Ujjaini Dutta)
((For previous columns by the author, Reuters customers can
click on LOCKETT/
hudson.lockett@thomsonreuters.com))