TOKYO Bain Capital clinched a $1.2 billion deal on Tuesday to buy Japanese nursing-home operator Nichiigakkan after fending off a higher, last-minute bid from rival Baring Private Equity Asia (BPEA).
Some financial industry professionals criticised Bain for closing its bid despite a new offer on Monday from Hong Kong-based Baring – which represented a 20% premium to Bain’s bid of 1,670 yen a share – saying minority shareholders’ interests had been neglected and they had lost out.
Shares in Nichiigakkan closed down 2% after the Japanese company said Bain’s bid was successful and it would be delisted.
Tokyo-based Nichiigakkan’s core businesses of elderly care, childcare and hospital staffing are growing steadily, according to the company, as demand for the services are rising in a country with a rapidly ageing population.
Baring said on Monday that it had approached members of Nichiigakkan’s founding family with an offer at an indicative 2,000 yen a share, valuing the company at 146 billion yen ($1.4 billion). Baring said it was open to negotiation and had offered to assist with a management buyout.
Given the higher bid, Bain should have extended its deadline for its offer to beyond Monday to allow investors to weigh both offers, said Shoya Ohkuma, chief executive of Tokyo-based proxy advisory firm QuestHub.
“The rights of Nichiigakkan’s minority shareholders were neglected completely throughout the process,” Ohkuma said. Nichiigakkan management should have taken the step of disclosing the counter proposal for a founding family to shareholders, he said.
Hong Kong-based investment firm Lim Advisors, which holds an undisclosed stake in Nichiigakkan, had asked Nichiigakkan’s management to seek an extension on Bain’s offer. Lim has put fair value for the company at 2,400 yen a share.
Bain’s success was mainly due to a deal it made with Singapore-based Effissimo Capital Management, which owns 12.5%
of Nichiigakkan. Bain has said Effissimo would tender its shares in exchange for an undisclosed stake in a vehicle that would
indirectly own Nichiigakkan.
Giving such a special condition to a certain shareholder represents a lack of fairness to minority shareholders, Ohkuma said.
Representatives for Bain and Baring declined to comment. Nichiigakkan officials were not immediately available for comment.
Bain launched its bid in May and extended it asNichiigakkan shares traded above the offer price. It raised its offer earlier this month to 1,670 yen a share from 1,500 yen. Prior to the launch of the bid, Bain had secured a 44% stake from Nichiigakkan’s top management and founding family members.
The head of Bain Capital’s Japanese operations, Yuji Sugimoto, sits on the board.
Nichiigakkan shares rose to as high as 1,743 yen on Tuesday morning. They closed down 2% at 1,664 yen.
($1 = 105.6600 yen)
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