KKR Takes Control of Fuji Soft After Battle With Bain for $4B Japanese Firm

KKR on Thursday announced the completion of its tender offer for Fuji Soft, setting the stage for the US buyout giant to privatise the Tokyo-listed systems developer in a deal valuing the company at north of $4 billion.

Upon settlement of the offer, funds managed by KKR will hold 57.92 percent of Fuji Soft’s issued shares and will begin a squeeze-out process to buy the remaining shares, the Manhattan-based firm said in a release.

The outcome marks the end of a protracted battle between KKR and Boston-based Bain Capital, which garnered support for its rival bid from Fuji Soft’s founding family but never launched its own tender offer. KKR Japan CEO Hiro Hirano thanked the Fuji Soft board for its “trust and endorsement” throughout the exercise.

“We are fully committed and look forward to supporting Fuji Soft’s plan to enhance its corporate value, under a new and simpler ownership by KKR following the privatisation, by leveraging our global network and expertise and to help Fuji Soft achieve its next stage of transformation,” Hirano said.

Record Performance

KKR plans to finance the tender offer predominantly from its $15 billion Asian Fund IV, a buyout strategy focused on private equity transactions across Asia Pacific. An extraordinary general meeting for the squeeze-out process is scheduled for late April.

For the year to the end of December, Fuji Soft achieved record-high revenue and operating income of JPY 317.5 billion ($2.1 billion) and JPY 22 billion respectively, with an operating income margin of 6.5 percent, according to KKR.

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 made last August.

“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,” the firm said at the time.

Seeking Seven & I Assets

The scramble for Fuji Soft unfolded amid a rush of foreign investment into Japan fuelled by the soft yen, low borrowing costs and undervalued assets.

Reuters reported in December that KKR and Bain each made first-round bids for the non-core assets of Seven & I Holdings, the Tokyo-listed owner of 7-Eleven. KKR offered JPY 800 billion ($5.1 billion) for York Holdings, an entity set to be spun out of the retailer, while Bain offered JPY 1.2 trillion, according to the news agency’s sources.

Also in December, US private equity titan Blackstone announced plans to buy the Tokyo Garden Terrace Kioicho commercial complex from Seibu Holdings for $2.6 billion, a sum that would mark the largest-ever real estate acquisition by a foreign investor in Japan.

In January, Canada’s Brookfield Asset Management acquired a stake in the Gajoen commercial complex in Tokyo’s Meguro ward, and a Nagoya logistics project, for a total of $1.6 billion.

Less than a month later, Hong Kong’s Gaw Capital Partners announced its acquisition of the Tokyu Plaza Ginza mall under a joint venture with Singapore-based Patience Capital Group, with market sources who spoke to Mingtiandi confirming a deal value of $1 billion.