Will Japan continue to be hostile to further acquisitions?


Japan Business and Finance Update

In the past two decades, when Japan may accept the idea of ​​hostile takeover as a standard feature of shareholder capitalism, a speculative cycle of sometimes excitement and frustration has emerged.

A sort of Breakthrough deal Involving one of the most divisive figures in the Tokyo market, Yoshiaki MurakamiA small green energy group called Japan Asia Group (JAG) and Carlyle, one of the world’s largest private equity funds, sparked the controversy. This is the first successful hostile acquisition by a financial buyer in Japan. If you can’t clearly answer the question of whether the floodgates have been opened.

Japan’s slow advancement of the legitimacy of hostility (or even initiative) focuses on its potentially transformative impact on the entire Tokyo market and the board of directors of 3,786 listed companies.

According to this theory, if the market is broken by the steady trend of hostile takeovers, company management will have to focus more consistently on improving the company’s value, and Japanese boards will more often be ashamed of exposure to failing to act for the benefit of shareholders. Many long-term Japanese investors now believe that this, combined with a higher level of domestic shareholder activism, is one of the very few catalysts that could drive a widespread revaluation of the market.

As far as the current situation is concerned, hostile or active bids are still generally regarded as rare, unlikely to succeed, and protected by a series of criminal tricks unique to Japan.

Although large and respected companies such as ITOCHU, Hoya, and Nitori have launched more and more games in the past few years, the memory of temporary poison pills and other strategies to block transactions in the mid-2000s cemented the idea that games were being manipulated Failure and those who play it may always be portrayed as bad guys. Therefore, the overall valuation of Japanese stocks is not like they live in a market for corporate control. If the price is right, or if it is particularly threatened when the management or stock price performance is severely underperformance, then corporate control can essentially be contested. of.

For hostile takeovers initiated by funds controlled by Murakami Takashi, the obstacles always seem to be particularly high. Murakami is a former trade ministry bureaucrat responsible for leading domestic shareholder activism. In many people’s eyes, this is a challenge to this challenge. Political punishment, yes Convicted of insider trading in 2007.

He was victorious in gaining control of JAG, Eight months of battle, Which perfectly illustrates the obstacles that still existed twenty years after Murakami first tried malicious bidding.

The legend is Launched in November last year When JAG announced a management buyout led by its president and Carlyle, Carlyle was one of many private equity groups that saw abundant opportunities in Japan. The proposed transaction may give JAG a premium to its weak share price at the time, but the company’s valuation is 35% lower than its tangible book value and is fraught with conflicts of interest.

Takashi Murakami initiated his hostile takeover in January, forcing Carlyle to double its offer-a move that mocked the JAG board’s approval of the initial offer and confirmed its unwillingness to act for the benefit of shareholders.

Murakami increased his bid; MBO failed and Carlyle withdrew. But the air is full of retaliation-the board of directors that once claimed that Carlyle’s 600 yuan per share bid was “fair” now declared that Murakami’s Y1210 bid was “not enough”.

The troubled JAG board issued a special dividend in an attempt to reduce the company’s appeal as a Murakami target, but this only deepened his armaments and strengthened his determination. In March, JAG tried to issue a Poison pillMurakami successfully blocked it in court, paving the way for his successful bidding at the end of July.

Three days after Murakami successfully became the first fund to complete a hostile takeover in Japan, JAG stated that it would sell controlling interests in its two most valuable subsidiaries to Carlyle for a total price of 46 billion yen. It is three times the original MBO offer.

After 20 years of hard work, Murakami stated in a transaction that the boycott of the Japanese board of directors may be illogical to shareholders and detrimental to shareholders. The buried value of Japanese companies will not release themselves, and the first offer will not be released. Not always the best.

He may not change the market, but he may have begun to reassess who the bad guys here are.

Leo Lewis is the Asian Business Editor of the Financial Times


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