In an unprecedented duel, private equity giants KKR and Bain Capital fight for control of the Japanese software company Fuji Soft, valued at four billion US dollars. Fuji Soft's board reaffirmed its support for KKR's existing offer of 8,800 yen per share on Friday, but did not completely reject Bain's newer offer, which is seven percent higher.
We consider the offer from Bain Capital as a serious proposal and will continue to review it," the board said on Friday evening in Tokyo.
The direct competition between two of the world's largest private equity firms for a Japanese company is unprecedented and is taking the M&A markets in Tokyo into uncharted territory. Analysts emphasize that companies and their assets in Japan are rarely evaluated from the perspective of active takeover control.
Fuji Soft, a provider of cloud software and digital systems, came under the scrutiny of investors when the Singapore-based fund 3D Investment Partners—the company's largest shareholder—proposed taking Fuji Soft private. This triggered an auction process that drew the attention of KKR and Bain.
KKR, which expressed its delight on Friday over Fuji Soft's continued support, initially reached an agreement with 3D and announced a takeover bid in August to privatize the company. However, in September, Bain surprised the market with a non-binding counteroffer, causing Fuji Soft's stock price to surge.
In response, KKR accelerated its offer and divided it into two phases. In the first phase, 3D and Farallon Capital Management, another key investor, agreed to sell their shares, resulting in KKR now controlling 32.7 percent of the shares. The second phase of the offer runs from the end of October to the end of November, giving shareholders time to assess Bain's higher offer.
Last week, Bain increased the pressure and submitted a binding acquisition offer of 9,450 yen per share, valuing Fuji Soft at $4.2 billion—slightly above KKR's offer. Fuji Soft's current stock price is 9,660 yen, above both offers, indicating the expectation of an escalating bidding war.
Some bankers, however, doubt that there will be further higher offers, as KKR's existing stake represents a de facto blocking minority. "The Japanese market is ready for such a battle between private equity firms, but no one will risk their reputation by proceeding hostilely," commented a Tokyo-based banker.
Bain declared that they would continue to support Fuji Soft as a "white knight" and show no intention of withdrawal despite recent developments. Neither 3D Investment Partners nor Farallon Capital Management wanted to comment on the events.
