KKR sweetens Hitachi Kokusai bid a second time but under market price

By Junko Fujita

TOKYO (Reuters) - KKR & Co LP has boosted its bid price for Hitachi Kokusai Electric Inc for a second time, seeking to appease U.S. activist hedge fund Elliott Management which has bought into the Japanese semiconductor equipment manufacturer.

The new price of 3,132 yen a share, which values Hitachi Kokusai at about $3 billion, is 8 percent more than its previous bid when the tender offer was launched in October and 25 percent higher than a proposed price first floated in April.

But it was below Hitachi Kokusai Electric's previous closing share price of 3,290 yen on Wednesday. Shares in the Japanese manufacturer, which has seen its earnings surge amid booming demand for chips, finished trade up 1.2 percent at 3,330 yen.

The tender offer, originally slated to close on Friday is now due to run until Dec. 8, Hitachi Kokusai said in a statement, adding that KKR's revised offer was final. KKR did not issue a statement of its own and declined comment.

A representative for Elliott was not immediately available for comment. A representative for Barclays Securities Capital Ltd, which owned 5.16 percent of Hitachi Kokusai as of Oct. 27, declined to comment.

Booming demand for semiconductors due to the global spread of smartphones and data server centres has resulted in a flurry of deals and rising valuations for chip-related firms.

Hitachi Kokusai, which manufactures equipment that forms thin films on wafers so that circuits can be printed on semiconductors, last month lifted its full-year net income forecast by 37 percent to 19.9 billion yen ($179 million).

Elliott, known for buying stakes in firms in the middle of takeovers and seeking better deals for shareholders, first disclosed a stake in Hitachi Kokusai in September and has since boosted its holding to 8.59 percent.

KKR had agreed to buy Hitachi Kokusai in April at 2,503 yen per share but the plan was shelved in August after a third-party committee set up by Hitachi Kokusai said the terms of the deal could be disadvantageous to minority shareholders.

Under the current proposed deal, KKR is seeking to buy at least a stake of about 23 percent and as much as 48.33 percent of Hitachi Kokusai.

It plans to spin off Hitachi Kokusai's chip-making equipment division, retaining full ownership and then sell 40 percent of the remaining business, which includes communications and video equipment divisions, to Hitachi Ltd and investment fund Japan Industrial Partners Inc.

Hitachi Ltd owns roughly 50 percent of Hitachi Kokusai and supports the buyout by KKR. As part of the same deal, Hitachi Kokusai plans to buy back Hitachi's stake at 1,870 yen per share and cancel those shares.

($1 = 111.4500 yen)

(Reporting by Junko Fujita; Additional reporting by Chang-Ran Kim, Sam Nussey and Makiko Yamazaki; Editing by Edwina Gibbs)