KKR Acquires Over a Third of Japan’s Fuji Soft Amid Takeover Tussle With Bain

US private equity giant KKR on Thursday announced its acquisition of more than a third of Fuji Soft, becoming the company’s largest shareholder and striking the latest blow in a three-month battle with rival Bain Capital for control of the Japanese software maker.

With the end of the first stage of a two-stage tender offer on Tuesday, KKR-managed funds acquired 21,413,302 common shares and 33.86 percent of the voting rights, Manhattan-based KKR said in a release. Securing that block of shares prohibits any other party from taking Fuji Soft private without KKR’s support, the firm said.

KKR Japan CEO Hiro Hirano described the first tender offer as an “important milestone” providing clarity as the buyout giant seeks to privatise the Tokyo-listed systems developer and repel Boston-based Bain’s competing bid, which values Fuji Soft at $4 billion and represents a nearly 7 percent premium to KKR’s offer.

“We are grateful for Fuji Soft’s continued confidence in our capabilities and believe that a stable and cohesive shareholder structure is in the company’s best interests,” Hirano said. “We look forward to sharing KKR’s full suite of resources and network to help Fuji Soft achieve its next stage of transformation.”

Fund Manager Showdown

KKR in August announced a JPY 8,800 per share tender offer for Fuji Soft, prompting Bain to reveal plans to make its own binding counter-offer. Before it managed to do so, however, KKR in September cinched up support for the tender offer from Fuji Soft’s two largest shareholders, Singapore-based 3D Investment Partners and US hedge fund Farallon, together holding a combined 32.68 percent.

Despite KKR seemingly having blocked potential pathways to success for counter proposals, Bain in October announced its binding offer of JPY 9,450 per share, conditional on its receiving support from Fuji Soft’s board of directors. Bain’s media contact in Japan had not responded to a request for comment by the time of publication.

KKR noted Thursday that Fuji Soft’s advisors, directors and officers had tendered roughly 90 percent of their share options and supported the first tender offer. The exercise also saw KKR acquire share options totalling 718,600 common shares, or 90 percent of the share options in existence before the first tender offer.

The US fund manager plans to launch a second tender offer this month to acquire all remaining shares and share options of Fuji Soft at an unchanged JPY 8,800 per share, reflecting a 110.3 percent premium to the average closing price for the 12 months to 2 October 2023 — the last full trading day before news of a potential tender offer began to surface in media reports.

Eye on Real Estate

KKR has said it will finance the Fuji Soft tender offer through its $15 billion Asian Fund IV, which is focused on private equity transactions across the Asia Pacific region.

A number of US private equity firms have been backing buyouts of Japanese companies with an eye, in part, to unlocking unrealised value from real estate assets on their balance sheets, with KKR having nodded to Fuji Soft’s property holdings in its original offer.

“KKR is considering the securitisation of real estate held by the target company and implementing measures to improve sales growth and profitability after the completion of the transaction,” KKR said at the time.

After building up its stake in Fuji Soft, 3D Investment Partners notified the company’s board in July of last year that it would solicit take-private proposals and in August revealed a plan to liquidate Fuji Soft’s real estate holdings.

“The liquidation of real estate is likely to result in the realisation of significant gains, which may have a significant impact on the company’s corporate value,” 3D said in a pitch book. “The company plans to sell many of its real estate holdings over the next 1-2 years, and its capital structure could change significantly depending on the quantity of real estate sold and at what price point.”