Japan court rejects request for injunction against controversial poison pill (updated)

Tokyo Kikai Seisakusho

29/10/2021 09:00

(Adds details of the case)
    By Makiko Yamazaki
    TOKYO, Oct 29 (Reuters) - A court on Friday rejected a
request for an interim injunction from Tokyo Kikai Seisakusho
Ltd's  6335.T  biggest shareholder that would have prevented the
company from issuing a poison pill - a closely watched ruling
with implications for future hostile bids in Japan.
    The Tokyo District Court rejected the injunction request
from Asia Development Capital (ADC)  9318.T , according to a
copy of the ruling seen by Reuters. 
    Tokyo Kikai, Japan's biggest manufacturer of printing
presses for newspapers, is seeking to issue new shares that
would dilute ADC's 40% stake - a holding that the investment
firm built up rapidly in a matter of weeks.
     A stake of more than 33% in Japan gives the stakeholder
veto rights over important board decisions and sometimes de
facto control.
    At an extraordinary general meeting last week where ADC was
prevented from voting, Tokyo Kikai shareholders voted in favour
of the poison pill. Tokyo Kikai said 79% of the vote was in
favour of the poison pill but ADC contests that those votes only
represent about 35% of all Tokyo Kikai's shareholders.
    Tokyo Kikai argues ADC's stake threatens the rights of its
minority shareholders, especially given that it rapidly built up
its stake and has not presented the company or other
shareholders with a new management plan.
    ADC counters that not being able to vote on the poison pill
is contrary to the principle of shareholder equality enshrined
in Japanese corporate law.
    The battle highlights both a rise in hostile takeovers in
Japan over the past few years as well as what experts have
called failings in the country's takeover rules, noting they
leave small cap firms particularly vulnerable to aggressive
stake-building from unwelcome investors.
    By comparison, in Europe tender offers are usually mandatory
for acquisitions of stakes beyond a certain threshold - 30% in
the UK - a rule that would prevent cases like Tokyo Kikai's. In
the United States, the decision to issue a poison pill can be
taken quickly by a company's board whereas Japanese companies
feel they need shareholder approval.
    

 (Reporting by Makiko Yamazaki; Editing by Edwina Gibbs)
 ((Makiko.Yamazaki@thomsonreuters.com; +81-3-4563-2805;))