September 11, 2017 / 5:30 AM / 2 years ago

Elliott squares off against KKR with Hitachi Kokusai stake

TOKYO/HONG KONG (Reuters) - U.S. hedge fund Elliott Management Corp said on Monday it has a stake of just over 5 percent in Hitachi Kokusai Electric 6756.T, putting pressure on a stalled takeover bid by U.S. buyout firm KKR & Co LP (KKR.N).

Elliott’s stake pits two Wall Street heavyweights against each other and underscores the increasing convergence of private equity investing and shareholder activism across the globe.

KKR agreed in April to buy the chip-making equipment and video solutions business from Hitachi Ltd (6501.T) in a deal valuing the unit at about $2.3 billion.

KKR planned to purchase up to 48.33 percent, paying 2,503 yen per share. Hitachi Kokusai was planning to buy back a 51.67 percent stake held by Hitachi at 1,710 yen a share, and then cancel those shares.

The plan was put on hold in August after a third-party committee said the terms of the deal could be disadvantageous to minority shareholders.

Elliott’s disclosure sent Hitachi Kokusai’s shares, already trading above KKR’s offer price, even higher on Monday and they ended up 4.6 percent at 2,895 yen.

“We are encouraged by the company’s recent business success and the board’s efforts to safeguard shareholders’ interests through the establishment of the third-party committee,” Elliott said in a statement.

Hitachi Kokusai’s first-quarter April-June sales jumped 64 percent to 47.6 billion yen ($439 million).

For years, pressure by activist investors helped push companies into the arms of private equity buyers. But activists have increasingly become competitors to private equity buyers.

A spokeswoman for KKR did not immediately return a call seeking comment.

Elliott, a $33 billion multi-strategy hedge fund with an aggressive activist shareholder arm, is known for buying stakes in companies that are in the middle of a takeover or an acquisition and forcing a better deal for shareholders.

Elliott often employs this strategy in Europe but has also attempted such a move in Asia previously. The fund attempted to block Samsung C&T Corp.’s (028260.KS) acquisition of Chiel Industries, Inc. in 2015, an effort that ultimately failed.

Elliott’s Hitachi Kokusai stake puts the spotlight back on KKR and its plans for Hitachi Kokusai. New York-based KKR, which pioneered the leverage buyout industry, has $148.5 billion of assets under management, according to its last quarterly earnings report.

Additional reporting by Michael Flaherty in New York; Editing by Edwina Gibbs and Dan Grebler

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