KKR Extends Fuji Soft Tender Offer Into January as Founder-Backed Bain Ups Bid

KKR on Thursday postponed the closing of its tender offer for Japan’s Fuji Soft until 9 January, as the US buyout giant seeks to repel a sweetened bid for the Tokyo-listed systems developer from rival Bain Capital.

The extension of the second-stage tender offer period, which had been due to expire on 19 December, is meant to allow Fuji Soft’s shareholders and share option holders to make a considered decision after Bain announced a heightened offer of JPY 9,600 per share last week, Manhattan-based KKR said in a release.

Bain’s bid represents a 1.6 percent premium to the current offer of JPY 9,451 by KKR, which said Thursday that no change to its price was being considered. Both offers have been eclipsed in recent weeks by the trading price of Fuji Soft’s Tokyo-listed shares, which closed Friday at JPY 9,757 each.

The latest cut and thrust between the private equity majors comes as KKR highlights the Fuji Soft board’s continued backing for the second-stage offer, while Boston-based Bain is pointing to support for its bid from Fuji Soft’s founding family members, who have questioned the judgement of the special committee advising the board.

“Bain Capital and the founding family have expressed significant concerns and distrust regarding several aspects of the process: the selection of members for Fuji Soft’s special committee, the criteria for choosing a privatisation partner, and the special committee’s response to Bain Capital’s proposals,” read a statement issued Friday under the name of Fuji Soft founder Hiroshi Nozawa.

War of Words

KKR contends that the changes in Bain’s revised terms, such as waiving the support of the board as a condition for launching the tender offer, have transformed the competing bid into a “hostile partial tender offer with the aim of seizing control of the company”.

Bain and the founding family countered Friday that the special committee consists of outside directors elected at an extraordinary shareholder meeting convened by 3D Investment Partners, raising questions about their independence. Singapore-based 3D and US hedge fund Farallon together hold a combined 32.68 percent of Fuji Soft and have supported KKR’s tender offer.

“In light of these circumstances, Bain Capital and the founding family have decided to waive the requirement for board approval to ensure that shareholders have the opportunity to make an informed decision,” the statement said. “This choice reflects our belief that the special committee has deviated from its original purpose. Importantly, Bain Capital and the founding family do not consider this move to be ‘hostile’.”

The founding family, which holds 18.6 percent of Fuji Soft’s shares, and Bain intend to jointly acquire over 50.1 percent of the company’s shares, according to the statement. KKR secured 33.9 percent of the shares in its first-stage tender offer.

Foreign Investment Rush

The tussle between the fund managers is part of a rush of foreign investment into Japan fuelled by the soft yen, low borrowing costs and undervalued assets.

Last week, 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.

On Wednesday, Mingtiandi reported that Blackstone had agreed to buy a pair of Okinawa resorts in a $130 million deal, citing market sources who confirmed an earlier account by Bloomberg.