Bain Capital clinches $1.2 billion deal for Japan's Nichiigakkan after fending off higher bid

TOKYO (Reuters) - 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 and Nichiigakkan’s management for closing the 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.

Nichiigakkan said in a statement it understands Baring did not make a counter bid to Bain as Baring failed to gain support from the founding family members.

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, said the board and the special committee had a responsibility to secure a fair outcome for all shareholders.

Lim said it would continue to demand Nichiigakkan provide additional information about the possible proposal by Baring and any other potential proposals to Nichiigakkan.

“The board recommended a sale of shares at what we believe to be a low price in a transaction where some shareholders have been provided an opportunity to reinvest in the business post privatisation while others have not,” Lim said.

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.

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 as high as 1,743 yen on Tuesday morning before closing at 1,664 yen.

($1 = 105.6600 yen)

Reporting by Junko Fujita; Editing by Susan Fenton, Kirsten Donovan