By Makiko Yamazaki and Ritsuko Shimizu
TOKYO, Feb 9 (Reuters) – Japanese companies are not obliged to accept unsolicited takeover bids even when offered large premiums, an industry ministry official told Reuters, amid growing concern about the targeting of leading firms by activist investors and foreign acquirers.
Corporate Japan has seen a wave of unsolicited takeover offers since the country’s powerful industry ministry introduced a code of conduct for mergers and acquisitions three years ago to crack down on excessive defensive tactics and encourage healthy industry consolidation.
However, there is also growing unease in the government of Prime Minister Sanae Takaichi, a hardline conservative who won a landslide election victory on Sunday, that Japan could lose access to critical technology through such takeovers.
The Ministry of Economy, Trade and Industry (METI) will emphasise the right of companies to rebuff bids in an update to the merger code planned for May.
“The board has the right to say no, if it believes that incumbent management can better enhance corporate value, or if it judges that a buyer could later engage in asset stripping or extract technology,” said Hiroyuki Sameshima, director at METI’s corporate system division.
The change risks disappointing investors who want more emphasis on shareholder returns and argue companies can cite a vaguely defined concept of corporate value to avoid engagement with potential acquirers.
Sameshima said shareholders can ultimately decide whose plans are more credible, based on disclosure by both the board and the bidder. “I want to be clear that the purpose of this update is not to encourage companies to implement takeover defence measures,” he said, adding that the changes are unlikely to slow the rise in unsolicited bids.
Merger and acquisition activity involving Japanese firms hit a record 35.7 trillion yen ($228 billion) last year, according to Recof Data. Eight unsolicited bids were launched with half of those successful.
Taiwan’s Yageo made a successful unsolicited bid for Shibaura Electronics last year in a landmark deal, while Canada’s Alimentation Couche-Tard dropped its bid for Seven & i citing a lack of engagement.
While M&A guidelines “have made the management more conscious of share prices, there have been takeover cases where the acquirer’s managerial capability is questionable,” said Kazunori Suzuki of Waseda Business School.
More disclosure around the buyer’s assumptions such as expected sales growth and cost cuts will help to form judgements about the feasibility of takeovers, he said, but added that it would be impossible to prevent shareholders focused solely on exiting at a high price from tendering.
($1 = 156.7000 yen)
(Reporting by Makiko Yamazaki and Ritsuko Shimizu; Editing by Sam Nussey and Christian Schmollinger)
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