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Hitachi Transport bidder KKR to launch tender offer by early November as planned – sources

Private equity firm KKR & Co [NYSE:KKR] will go ahead and launch its JPY 8,913 per share tender offer for Hitachi Transport System (HTS) [TYO:9086] as indicated by early November even if the Russian inward direct investment approval is still outstanding, according to two sources familiar with the situation.

The JPY 749.986bn (USD 5.0bn) tender offer to acquire all HTS shares not owned by HTS’s parent Hitachi Ltd [TYO:6501] was originally planned for the end of September, but on 29 September KKR announced that it would postpone the launch until early November because prior notification was required under a new Russian Presidential Decree that took effect on 8 September.

All other regulatory approvals had been obtained at that time, according to the KKR announcement.

One of the sources familiar with the situation said KKR believes there is a way to handle the Russian regulatory issue in a way that it won’t disrupt the indicated timetable and hence the plan is to go ahead and launch the tender offer by early November.

The source didn’t go into details, but according to the initial 28 April deal announcement, KKR has the right to waive certain conditions, although the document did not spell out which ones.

As per the same April announcement, the tender offer will remain open for 21 business days. But under Japanese regulations, it can be extended beyond that if necessary. This will provide additional time for the Russian approval to come through before the deal closes, should it not be in place at the time of the launch.

A spokesperson at Hitachi Ltd had told this news service earlier this month that both the parent company and HTS had been told by KKR that the bidder was aiming to launch the tender offer by early November following discussions with overseas law firms regarding the legal process.

KKR declined to comment.

In Russia, HTS primarily deals with the logistics of moving automobile parts for Nissan Motor [TYO:7201] through its subsidiary VANTEC Group.

A spokesperson at HTS said the company’s Russian assets do not amount to much – they only comprise a tiny lease contract for a few warehouses in St. Petersburg – and VANTEC currently has only 10 local employees. In March this year, Nissan suspended exports of vehicles to Russia in the wake of Russia’s invasion of Ukraine, which led to HTS also suspending its operations in St. Petersburg and withdrawing all its Japanese representatives on the ground.

Then, on 11 October, Nissan announced it would withdraw from Russia altogether by transferring its operations to a local company for just 1 euro. The automaker said in the statement that it was waiting for Russia's approval for the withdrawal, which was expected to come in a few weeks.

The HTS spokesperson had previously told this news service that if Nissan were to withdraw from Russia, then HTS would also withdraw its operations because it was not possible to continue operating in Russia without its main customer. As of today (24 October), HTS has not made any announcement on its plans in relation to Nissan’s withdrawal from Russia.

KKR has so far obtained antitrust approvals from Japan, China, the US, Europe, Russia and Turkey, as well as approval for foreign direct investment (FDI) in Japan, according to a statement by HTS.

Once the JPY 8,913 per share tender offer for the 60.09% stake held by minority shareholders has been completed, KKR, through its buyout vehicle HTSK, will acquire the remaining 39.91% stake (33,471,578 shares) held by Hitachi Ltd at a lower price of JPY 6,632 per share. Hitachi will then reinvest by acquiring a 10% stake in HTSK.

HTS’s shares closed 0.12% higher at JPY 8,630 in Tokyo on Monday (24 October), reflecting a 3.3% spread versus the tender offer price. The benchmark Nikkei average, meanwhile, finished up 0.52% at 27,029.46.