KKR completes $1.3b tender offer for Japan's Hitachi Koki

The GP said in a statement that the bid had won support from investors holding 89.79% of shares and stock acquisition rights in Hitachi Koki – comfortably exceeding the 66.7% threshold required for the deal to go through. KKR had already agreed to buy parent company Hitachi’s 40.25% stake in the business and a further 10.9% from another subsidiary, Hitachi Urban Investment.

The tender offer was priced at JPY870 per common share, but it assumes the payment of a special dividend of JPY580 per share on completion of the offer, which equates to an overall valuation of JPY1,450 per share. The price represents a slight discount to Hitachi Koki's January 12 closing price, but the stock had posted significant gains since Hitachi said in December that it was considering a sale among other options.

“Through the combination of Hitachi Koki’s strengths in technological development and KKR’s global network and management expertise, I am confident we can accelerate Hitachi Koki’s growth strategy and further improve customer value,” said Hiro Hirano, CEO of KKR Japan.

Hitachi Koki was founded in 1948 and became a consolidated subsidiary of Hitachi in 2009. It manufactures power tools such as drills, saws, grinders and polishers, as well as centrifuges for use in life sciences. Revenue came to JPY141.6 billion for the 2016 financial year, up from JPY135.8 billion in 2015, but net income fell to JPY1.12 billion from JPY3.51 billion over the same period

The company is looking to expand internationally, acquiring German power tool company Metabo in March 2016 and forming a strategic alliance with North American hardware chain Lowe's Home Improvement the year before that. Hitachi said that in view of intensifying competition in the power tool industry, it concluded that KKR - with its global resources and expertise - was best positioned to help Hitachi Koki achieve sustained growth and increase its corporate value.

Japanese conglomerates in general are under more pressure to focus on return on equity, even if this means paring their labyrinthine interests. This was also a contributing factor in Nissan Motor’s decision last November to sell a 41% holding in automotive components supplier Calsonic Kansei Corporation to KKR. The PE firm subsequently made a tender offer for the entire business worth JPY498.3 billion. It has yet to close.

KKR is currently raising its third pan-Asian fund, which has an institutional hard cap of $8.5 billion. The Hitachi Koki investment will primarily come from the previous fund; other Japan deals from that vehicle include carve-outs of Panasonic Healthcare and Pioneer Corporation’s DJ equipment business.

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• Topics
• North Asia
• Buyouts
• Industrials
• Japan
• KKR
• manufacturing