Investment firm felt pressured to sell Tokyo Kikai stake after 'poison pill', CEO says
10/03/2022 05:07
By Makiko Yamazaki
TOKYO, March 10 (Reuters) - The Japanese investment firm
that failed to break a "poison-pill" defence in its bid for a
printing press company had no choice but to sell most of its
stake at a loss or risk a battle that would have destroyed more
value, its chief executive said.
Tokyo-listed Asia Development Capital Co Ltd 9318.T last
month sold 32% of Tokyo Kikai Seisakusho Ltd 6335.T to a group
of newspaper publishers led by Yomiuri Shimbun, effectively
ending its unsolicited bid for the 106-year-old company.
urn:newsml:reuters.com:*:nL1N2V101A
"We were bound to lose if we continued our fight with Tokyo
Kikai's management," Anselm Wong, the Malaysian businessman who
heads Asia Development, told Reuters in an interview last week.
"When Yomiuri offered to buy the stake, we felt we had no
choice."
His comments follow an intense legal battle in corporate
Japan over the past year that illustrates the high hurdles
unsolicited bids still face in the country's capital markets and
potentially sets a precedent for similar bids. urn:newsml:reuters.com:*:nL1N2RL0LE
Wong took Yomiuri up on its offer to buy the 32% stake, he
said, believing he was unlikely to get support from Yomiuri and
other newspapers if he rejected the offer. Without the support
of Japan's powerful broadsheets - the Yomiuri is one of the
world's largest newspapers by circulation - Tokyo Kikai's
printing press business could face trouble, he said.
Yomiuri told Reuters in a statement the sale talks had
started at Asia Development's request and not Yomiuri's. It said
the confrontation between Tokyo Kikai and Asia Development was
"clearly irreparable," and the newspaper companies' share
acquisition was "the only option to normalise the situation and
put Tokyo Kikai management on course for stability".
A poison pill is a strategy designed to thwart hostile
takeovers whereby other shareholders get new shares in the
company, diluting the suitor's stake.
Japan's supreme court last year ruled against Asia
Development, which had tried to stop Tokyo Kikai from issuing a
poison pill defence. urn:newsml:reuters.com:*:nL1N2S90DP
As a result Asia Development had to reduce its 40% stake to
just under 33% or risk massive dilution. Ultimately, it sold far
more to Yomiuri and the other newspapers.
The 2.2 billion yen ($19 million) sale resulted in a
one-time loss of 1.6 billion yen for Asia Development and left
it with 8% in Tokyo Kikai.
The supreme court case was closely watched by investors as a
gauge for the legal future of potential hostile bids. As
corporate governance has improved in the world's third-largest
economy, hostile bids - once taboo - have become a little more
common.
Wong, who first came to Japan as a student and speaks fluent
Japanese, said he believed investment returns from the remaining
8% would eventually offset the 1.6 billion yen loss.
He said management had made Tokyo Kikai less attractive
since the firm, previously profitable, posted a loss of 969
million yen in the nine months through December.
Asia Development had previously called on Tokyo Kikai to
step up its business helping the newspaper industry digitise and
find new investment opportunities.
Tokyo Kikai said in a statement to Reuters it would strive
to increase corporate and shareholder value with commitments to
support the newspaper industry and serve the public interest.
Shares of Tokyo Kikai are down around 30% this year after
surging more than four-fold last year.
(Reporting by Makiko Yamazaki; Editing by David Dolan and Sam
Holmes)
((Makiko.Yamazaki@thomsonreuters.com; +81-3-4563-2805;))