By Anton Bridge
TOKYO (Reuters) -Bain Capital said on Wednesday it plans to launch a tender offer for Fuji Soft shares even without the backing of the Japanese firm’s board should a second-round bid from rival suitor KKR fail.
The estimated $2 billion bid for just under half of the Japanese IT firm’s shares likely portends a rare hostile tussle between the two global private equity giants.
Bain last week offered 9,600 yen per share, 1.6% more than KKR has done. KKR, which has the backing of the Fuji Soft board, secured 33.9% in a first-round tender that managed to dodge an earlier bid from Bain that was at the time higher than its own.
Bain, however, has the backing of Fuji Soft founder and major shareholder Hiroshi Nozawa. He and other family members hold a combined 18.6% stake and a Bain-Nozawa combination could result in them controlling two-thirds of the company.
“Bain don’t have management’s approval so it’s a hostile offer, but they see themselves as a white knight,” said Travis Lundy of Quiddity Advisors.
Nozawa called Bain a white knight in a letter of support made public in October.
Fuji Soft’s board this week reaffirmed its support for the second stage of KKR’s bid despite the lower offer price of 9,451 yen.
Bain said it has “strong concerns and distrust” over Fuji Soft’s response to its proposal, adding that there was no reason for its higher offer to be rejected and the rejection harmed the interests of minority shareholders.
It had previously said it would only commence a tender offer with the board’s approval. It expects to launch the bid in either late January or February and will finance it with internal resources.
Fuji Soft’s share price finished 1.3% higher at 9,771 yen, indicating that investors are speculating about the prospects of a more heated bidding war.
Fuji Soft and KKR declined to comment on Wednesday.
GOVERNANCE CONCERNS
The Japanese firm said on Tuesday that it had rejected Bain’s offer as KKR already had 34% and having two major shareholders would hinder management’s decision-making ability.
It added that the tender would take at least three months to conclude and said the additional 1.6% Bain has offered was not worth the loss of time in reaching a conclusion on ownership.
Bain said its aim to acquire a controlling interest eliminated the risk of governance deadlock.
It also questioned the independence of the special committee set up to examine the merits of a Fuji Soft deal, noting that 5 of 6 members were appointed at an extraordinary general shareholder meeting convened by 3D, which tendered its shares to KKR.
