A Bain-advised vehicle with LY Corp. raised its proposal to ¥3,700 on Monday. On Tuesday, Kakaku said it treats that as a qualifying counteroffer and asked EQT's vehicle to discuss changing its ¥3,682 price. The shares closed above both.
The contest for Japan's Kakaku.com has turned the pressure back on the bidder the board already supports.
EQT's offer, through its vehicle Kamgras 1, launched in May at ¥3,000 a share and now stands at ¥3,682. Its tender period runs to Wednesday, Oct. 28. On Monday, a competing vehicle advised by Bain Capital and backed by LY Corp., BCPE Blitz Cayman, raised its proposed price to ¥3,700 from ¥3,597, or ¥3,720 if KDDI signs an agreement not to tender its shares. It said it expects to launch its tender offer in mid-November.
On Tuesday, Kakaku said it treats the Bain group's proposal as a qualifying counteroffer and has asked EQT's vehicle to discuss changing its price. If EQT does not match within 10 business days, Kakaku would be released from its obligation to support EQT's offer.
For now, Kakaku said it continues to support EQT's offer but remains neutral on whether shareholders should tender, leaving that decision to them. The two offers are mutually exclusive. Kakaku said it would be undesirable for EQT's offer period to keep being extended while the Bain group's offer fails to launch.
Kakaku shares closed at ¥3,760 in Tokyo on Tuesday, above both offers.
What the share price says
When a target trades above every bid on the table, the market is betting on a higher one. At ¥3,760, Kakaku is about 2.1% above EQT's price and about 1.6% above the Bain group's.
Shareholders who tender to EQT at ¥3,682 would be accepting less than the market price. Those who wait are betting that EQT will raise its price in response to Kakaku's request, or that the contest will produce something better.
The timing problem
The gap in timing is the board's dilemma. EQT's offer closes on Wednesday unless extended. The Bain group's would not start until mid-November, and that start depends on EQT not matching and on the board backing the Bain offer. A board that supports the bid in hand while asking that bidder to pay more is signaling that it considers the current price beatable.
Two readings
One reading is that the contest is working for shareholders. Since July, competition has pushed EQT's offer up six times, to ¥3,682 from ¥3,000, and the Bain group has raised its proposal three times. The board has now formally asked EQT to respond again, and the shares reflect the expectation of a better outcome.
The other is that the uncertainty cuts both ways. The Bain group's offer will not launch for weeks and depends on conditions outside its control, and if EQT neither raises nor extends, shareholders could face a gap with no live offer at all until the Bain group launches, if it does.
What to watch
Whether EQT raises or extends before Wednesday's deadline, its response within the 10-business-day window, the board's recommendation if terms change, and the share price relative to both offers.