KKR Set to Dodge Drawn-Out Fuji Soft Duel With Bain as 3D, Farallon Agree to Tender

Fuji Soft’s two largest shareholders have agreed to tender their shares in the Japanese systems developer, handing a victory to US buyout giant KKR and likely avoiding a prolonged bidding war with rival Bain Capital.

Singapore-based 3D Investment Partners and US hedge fund Farallon, holding a combined 32.68 percent shareholding in Tokyo-listed Fuji Soft, have tendered and will not withdraw their tenders, KKR said Thursday in a release.

The news came after the Manhattan-based firm’s decision to remove the minimum number of shares to be purchased in the initial tender offer and to commence a second-stage tender offer “as soon as practicable”. KKR has upheld its initial offer made in August of JPY 8,800 a share, which was followed by Boston-based Bain’s statement this month that it planned to make a counter-offer.

To improve profitability and capital efficiency at Fuji Soft, “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 Manhattan-based firm said in the announcement of its initial tender offer.

Liquidation Plan

Led by former Broad Peak partner Kanya Hasegawa, 3D invested in Fuji Soft in 2020 and waged a proxy fight that saw the fund manager place two of its nominees on the board of directors in late 2022.

In July of last year, 3D notified the board of its plans to solicit take-private proposals. The following month, the firm 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.”

With Bain failing to make a binding counter-offer for Fuji Soft before 3D and Farallon’s acceptance, KKR’s quickly amended tender is effectively “checkmate”, according to Arun George, an analyst at Global Equity Research in London.

“KKR has deftly outmanoeuvred Bain by switching to a two-stage tender at an unchanged JPY 8,800 and securing 3D/Farallon’s shares,” George said in a post at Smartkarma. “Bain is likely to walk.”

Fuji Soft shares closed at JPY 9,070 on Friday, down 3 percent.

Emerging Arena

KKR plans to finance the tender offer through its $15 billion Asian Fund IV, which is focused on private equity transactions across the Asia Pacific region.

Japan is an emerging arena for corporate buyouts, including in the real estate industry. Logistics operator Trancom this week announced plans to go private in a management-led buyout after endorsing a tender offer from Bain valuing the company at JPY 95.8 million ($670 million).

Last week, Japanese real estate giant Hulic launched a takeover bid for Raysum, a Tokyo-listed builder controlled by Hong Kong fund manager Oasis Management, at a total acquisition cost of JPY 173.5 billion ($1.2 billion).