KKR's tender offer for Hitachi Kokusai succeeds by slight margin

TOKYO – 9 December 2017: U.S. buyout fund KKR & Co LP (KKR.N) managed a successful tender offer for Japanese semiconductor equipment maker Hitachi Kokusai Electric Inc (6756.T) by a razor-thin margin, winning 24.9 percent of the company, statements from the companies showed on Saturday.

KKR had sought at least about 24 percent of Hitachi Kokusai at 3,132 yen each in a contentious tender offer that closed on Friday. Parent Hitachi Ltd (6501.T) has agreed to sell its stake of just over 50 percent back to Hitachi Kokusai at 1,870 yen per share as part of the $2.2 billion deal.

KKR had boosted its offer price twice to appease U.S. activist hedge fund Elliott Management, known for buying stakes in firms in the middle of takeovers. The first increase came after Elliott disclosed a stake in Hitachi Kokusai in September, and the final price was 25 percent higher than the initial offer of 2,503 yen.

Elliott has since boosted its holding to 8.59 percent.

KKR said in a statement 26,242,364 shares were tendered, versus the minimum 24,815,889 it was seeking. The tendered shares amount to 25.5 percent of Hitachi Kokusai when excluding treasury shares.

KKR has been taking advantage of a push by Japanese conglomerates to restructure and spin off non-core assets. In January it bought Hitachi Koki Co, Hitachi’s power tool unit, for $1.3 billion. That followed a $4 billion acquisition of autoparts maker Calsonic Kansei Corp from Nissan Motor Co (7201.T) last year.

Elsewhere, KKR on Friday agreed to buy industrial tool components maker Hyperion from Sweden’s Sandvik (SAND.ST) in a deal worth 4 billion Swedish crowns ($471.6 million).

Booming demand for semiconductors thanks to the global spread of smartphones and data server centres has resulted in a flurry of deals and rising valuations for chip-related firms. Hitachi Kokusai in October lifted its full-year net income forecast by 37 percent to 19.9 billion yen ($179 million).

KKR initially agreed to buy Hitachi Kokusai in April at 2,503 yen per share, but the plan was shelved in August after a third-party committee set up by the Japanese company said the terms of the deal could be disadvantageous to minority shareholders..

Expectations that KKR would raise its offer price drove Hitachi Kokusai’s stock to as much as 3,370 yen, the highest in more than 25 years, versus 2,416 yen on the day before the deal was first announced.

Hitachi Kokusai ended at 3,155 yen on Friday.

KKR plans to spin off Hitachi Kokusai’s chip-making equipment division, retaining full ownership, and then sell 40 percent of the remaining business, which includes communications and video equipment services, to Hitachi and private equity firm Japan Industrial Partners Inc.