KKR Urges Action Against Bain Capital for Violating NDA

In a rare battle between two competitors, the US-based private equity giant KKR called on the board of Japanese tech firm Fuji Soft to take legal action against fellow American investment firm Bain Capital for its unauthorised use of confidential information and breach of its nondisclosure agreement (NDA).

This has significantly jeopardised the reputation of private equity funds in Japan, which has been collectively established through decades of professional compliance to regulatory and contractual obligations and a track record of value creation as friendly acquirers of target companies, KKR said in a letter to Fuji Soft.

The US firm said that given Bain Capital’s continued breach of their NDA and its disregard of Fuji Soft’s multiple requests for the destruction of confidential information obtained in a different capacity.

Bain has rejected Fuji Soft’s demand that to destroy the information saying that Japan’s guidelines on mergers and acquisitions and the pressure they put on companies to remain open to the best deal for shareholders.

Irked at the Bain Capital’s response, KKR, which is Fuji Soft’s largest shareholder with around 34% ownership, asked Fuji Soft’s Board of Directors and Special Committee to seek an injunction against Bain Capital’s continued unauthorised use of confidential information.

“However, Bain Capital has continued to ignore your repeated requests for more than one and a half month to destroy information and has continued to misuse its confidential information. Based on their disclosures and your responses, it appears that Bain Capital is in violation of its obligation under its non-disclosure agreement with you to promptly destroy all confidential information that we understand it owes to your company,” KKR said.

Justifying Violations

Bain has even tried to justify its NDA violations and non-compliance of contractual obligations, as well as its flouting of the spirit of the Financial Instruments and Exchange Act (FIEA), by accusing the Special Committee of having “deviated from its original purpose” after gaining its trust and due diligence access.

“We believe it is questionable whether contractual breaches are something that can be tolerated by Bain Capital’s senior stakeholders and its investors, and this also ultimately raises questions about whether a hostile tender offer will ever be launched,” KKR said.