KKR & Co. (KKR) is considering teaming up with state-backed Innovation Network Corp. of Japan as it seeks to buy a majority stake in Panasonic Corp. (6752)’s health-care unit, said three people with knowledge of the matter.
The U.S. private equity firm last week got preferential negotiating rights after two rounds of bidding for Panasonic Healthcare Co., which is valued at more than 150 billion yen ($1.5 billion), said two of the people, who asked not to be identified as the process is private. Panasonic plans to keep a stake in the unit, according to the people.
Panasonic Healthcare, which provides digital medical record systems and makes instruments that measure blood glucose, would be KKR’s biggest acquisition in Japan, data compiled by Bloomberg show. Osaka-based Panasonic is selling control of the unit as it focuses on a 250 billion-yen plan to reverse losses at its electronics business in the next two years.
KKR, run by Henry Kravis and George Roberts, is also exploring a wider alliance with INCJ for health-care industry investments, the people said. Any deals would be done through Panasonic Healthcare, they said. Allying with INCJ could give New York-based KKR more access to potential investments in Asia’s second-largest economy, one person said.
“It’d be a rare deal if the alliance between KKR and the state fund is realized,” said Yasuhide Yajima, chief economist at NLI Research Institute in Tokyo. “The market’s closely watching this deal.”
KKR and INCJ haven’t entered formal talks to co-invest in Panasonic Healthcare and the U.S. firm may still proceed to buy the stake on its own, the people said.
INCJ was formed by then-Prime Minister Taro Aso’s administration in July 2009 to invest in technology that would make Japan more globally competitive. It is capitalized at 280 billion yen, with 266 billion of funds from the Japanese government and 14 billion yen from 27 private companies, according to INCJ’s website. The government provides total guarantees of as much as 1.8 trillion yen for INCJ investments.
KKR, Toshiba Corp. (6502) and Bain Capital LLC were among bidders picked in June to make second-round offers for Panasonic Healthcare, according to people familiar with the matter. Fewer than 10 suitors made offers for the unit in the first round, people with knowledge of the matter said in May.
Spokesmen for KKR and INCJ declined to comment, as did officials from Panasonic, Toshiba and Bain.
KKR is conducting due diligence on Panasonic Healthcare, two of the people said. Goldman Sachs Group Inc. (GS) is advising KKR and Bank of America Corp. is working with Panasonic, according to the people.