Antitrust Lawyer Blog Commentary on Current Developments

Rare Japanese Takeover Rejected

On July 26, Oji, Japan’s largest paper manufacturer said it would go ahead with a tender offer for sixth-ranked Hokuetsu in a deal that could exceed $1.4 billion, a rare attempt at a hostile takeover in a society where deals are generally more cautious and consensus-led. An Oji-Hokuetsu merger would create the world’s fifth-largest paper manufacturer. In a move to prevent Oji Paper Co.’s hostile takeover bid, Nippon Paper Industries Co. started purchasing large amounts of Hokuetsu Paper Mills Ltd.’s shares.
Nomura Holdings Inc., Japan’s largest securities firm, is advising Oji Paper Co in, as well as offering a loan to fund, the entire deal. Nomura, under pressure from shareholders to cut its reliance on trading revenue, is driving this takeover. Investors say this deal is exactly the kind that Nomura, which reported its lowest profit in a year, should pursue to help reverse a share-price slide that wiped $10 billion from the firm’s market value in four months.

Hokuetsu’s board rejected the Oji bid and offered shares at a lower price to Mitsubishi Corp, Japan’s largest trading company, to try and block the takeover. It also said it may issue equity warrants to all existing shareholders. If the bid was successful, it would set the tone for more hostile acquisitions.

Hokuetsu is determined to stay independent and rejected Oji’s offer to buy 50% of the company. However, its outright rejection of the proposal without consulting shareholders annoyed some stock holders, a quarter of who are foreigners. At the same time Hokuetsu launched a poison pill defense, involving the issue of new shares to dilute a hostile bidder’s stake should it acquire a holding of more than a 20%. Mitsubishi Corporation is also involved in the battle, having agreed to buy 30 billion yen of new shares from Hokuetsu. Such a move would give Japan’s top trading house a quarter stakes in terms of voting rights.

For more information contact:

Andre Barlow
202-589-1838
abarlow@dbmlawgroup.com