The contest for Kakaku.com (TSE: 2371) has become the most instructive Japanese M&A situation of the year – both due to the scale of the deal – ¥700bn, but also because of the complex dynamics involving multiple large shareholders. We previously discussed the dynamics of the deal here: https://senjincap.com/private-equity-growth-continues-providing-ongoing-support-for-activist-exits/.
The deal to mid-July
Kakaku.com operates the price-comparison site of the same name, restaurant platform Tabelog, and job-search service Kyujin Box. It is asset-light, cash-generative, and sitting on one of the richer consumer datasets in Japan. Its unaffected price was ¥2,121 on 22 April.
EQT launched a tender offer on 13 May at ¥3,000 per share, with unanimous board and special committee support and agreements from Digital Garage and KDDI – 38.1% between them – to exit via a tax-advantaged post-tender buyback, with Digital Garage rolling into roughly 20% of the acquisition vehicle. A tidy, board-endorsed, pre-wired deal.
It did not stay tidy. Bain Capital and LY Corp (LINE Yahoo) had already tabled non-binding proposals and moved to ¥3,232 the following day, citing the strategic value of Kakaku’s data in a generative-AI environment. On 1 July they submitted a legally binding proposal at ¥3,384 — rising to ¥3,500 if they could secure a non-tender agreement with KDDI – and, critically, locked in a tender commitment from activist Oasis Management over 19.5% of the company. Kakaku’s board went neutral, pressed EQT to reprice, and EQT obliged at ¥3,450 on 17 July.
The escalation, and Oasis
What has happened since makes the situation even more interesting.
Bain and LY went to ¥3,520, or ¥3,640 with KDDI, at the end of July. EQT countered at ¥3,570 on 13 August and extended its offer to 27 August – its fourth extension. The stock closed that day at ¥3,714, nearly 4% through the live bid, and has stayed there. The market’s verdict was unambiguous.
Then, on 19 August, Oasis made its position public: it will not tender below ¥3,640, and it has asked the board and special committee either to withdraw support for EQT or negotiate a price above that level. Two days later, Bain and LY signalled they would not bid again, preferring to let EQT’s offer run its course and, if it fails, pursue the KDDI non-tender agreement and launch their own offer in mid-September.
This is a well-constructed piece of activism. Oasis is not bidding, not litigating, and not running a proxy campaign. It is simply declining to tender and holding out for a better price. Its large stake puts it very close to being the kingmaker in this process.
The implications run further. The special committee is in an uncomfortable position: it is recommending a price that a fifth of the register sees as inadequate, against a competing proposal at a higher headline number. Boards that have been told for three years (per METI’s takeover guidelines) to run fair processes are discovering, yet again, that a fair process does not end when they pick a winner. However, KDDI’s presence complicates matters further – making Bain’s rival bid difficult to execute without KDDI coming on board. No doubt KDDI’s institutional shareholders will be watching with the expectation that KDDI behaves so as to maximise value.
Our expectation is that EQT’s offer does not clear on 27 August as currently priced, and that the situation resolves either through a further EQT increase or by moving to the Bain/LY track in September.
The wider frame
Bidding wars are increasingly becoming a feature rather than an anomaly in Japan. KKR and Bain fought over Fuji Soft through five rounds of price increases. Kakaku.com has now seen six. In both cases the incumbent board’s endorsement proved to be an opening position rather than a conclusion, and in both cases the final price sat far above the first.
Activist interventions in deals where management does not control the shareholder register have continually resulted in much higher prices being received by minority shareholders – most famously where Elliot Management forced revised pricing for the Toyota Industries take-private deal.
Oasis’ stake in Kakaku.com is proving to be a fantastic investment. The stake was acquired during the stock’s almost 40% sell-off on AI fears.
Private Equity continues to be a major source of return for smart shareholder activists.
