Baring Asia mulls challenging for Japan's Nichii Gakkan

The firm said it had sent letters to certain members of the founding family, offering to evaluate the possibility of a “friendly” management buyout as well as a tender offer at JPY2,000 per share. It added that the price is based solely on public information and may change if due diligence follows.

The price represents an 83% premium to Nichii Gakkan’s closing price on May 7, the last trading day before Bain Capital submitted a bid for the company. As of midday on August 18, the stock was at JPY1,666, down 1.88% for the day.

Bain won board support for a tender offer of JPY1,500 per share, but increased the price to JPY1,650 this month. One of the investors, hedge fund manager Lim Advisors, had insisted the offer was too low, arguing that JPY2,400 per share represents fair value. Lim said that Baring’s tentative bid reinforced this view and called for the tender offer period to be extended.

Bain is targeting up to 16.3 million shares – an equity interest of 24.76% – through the tender. Agreements are already in place to acquire 44% of the total shares outstanding from relatives of Akihiko Terada, Nichii Gakkan’s founder, chairman and CEO, who died last September, and an asset management company controlled by the family.

The GP has also won over Effissimo Capital Management, which owns 12.46% of Nichii Gakkan. It will tender its shares in return for an interest in Bain’s acquisition vehicle. Lim opposed certain investors being granted preferential terms based on agreements to reinvest post-privatization. It also said that support from a majority of independent minority shareholders should be required for the transaction to proceed.

Bain has committed JPY27 billion in equity to the deal, with a further JPY98.6 billion in debt financing secured from MUFG Bank, Mizuho Bank, Sumitomo Mitsui Banking Corporation, and Nomura Capital Investment.

Established in 1968, Nichii Gakkan has 37 subsidiaries and employs 95,000 people. It has six key business silos: administrative, business management and human resources support for hospitals and clinics; in-home and residential aged care services; daycare centers for children; housekeeping services for the healthcare and aged care segments; education services; and dog salons.

The company has also expanded overseas, notably in China where it offers aged care, childcare, housekeeping, and education services. It also operates schools in Australia, Canada and the Philippines, while a dog salon business – under the A-Love brand – is present in Australia.

Nichii Gakkan generated JPY297.9 billion in revenue for the 12 months ended March 2020, up 3.5% year-on-year, while net profit declined by 33.6% to JPY4.1 billion. For the nine months ended December 2019, revenue and net profit were JPY223.5 billion and JPY3.4 billion, respectively. Aged care accounted for 51% of revenue and medical support contributing 38%.

Baring has approximately $20 billion in assets under management across private equity, real estate, and credit. Previous activity in Japan includes the privatization of Pioneer Corporation.

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• Topics
• North Asia
• Buyouts
• Support services
• Healthcare
• Japan
• Baring Private Equity Asia
• Bain Capital Asia