On January 28, SBI Shinsei Bank, Limited, formerly the Long-Term Credit Bank of Japan, Ltd., announced that it would repay 100 billion yen in public funds by the end of the current fiscal year ending March 31, through its equity capital and an additional investment from its parent company, SBI Holdings, Inc. The bank also stated that it aims to repay the remaining 230 billion yen as soon as possible, with the goal of achieving its third listing on the Tokyo Stock Exchange. In 2021, SBI Holdings launched an “unsolicited takeover bid (TOB)” against Shinsei Bank. However, Shinsei Bank’s management rejected the offer and considered taking defensive measures. In the end, no white knight emerged, and Shinsei Bank accepted the SBI’s offer.

Makino Milling Machine Co., Ltd. (hereinafter “Makino”) is currently shaken by Nidec Corporation’s “TOB without prior consultation.” On December 27 last year, Nidec announced its intention to launch a tender offer for Makino. Taken by surprise, Makino established a special committee composed of independent outside directors and requested Nidec to postpone the start date of the tender offer and raise the minimum share purchase threshold for its completion. However, Nidec “remains committed to” its stated policy. Publicly disclosing negotiations between the acquirer and the target company is considered fair to investors, and it also allows the buyer to proceed with the acquisition at a faster pace. On the other hand, it will cause inadequate due diligence, which could lead to concerns that the buyer may rush into an overpriced deal due to eagerness to acquire the target, as well as further concerns that an overly aggressive process might demoralize the target company's employees.

This approach by Nidec is an unusual development in mergers and acquisitions between Japanese companies, which typically favor a “more conciliatory process of business integration.” However, hostile M&As are not uncommon these days, as seen in ITOCHU Corporation’s acquisition of Descente and Colowide’s acquisition of Ootoya Holdings. Other notable cases include Oji Paper’s unsuccessful attempt to acquire Hokuetsu Paper Mills, and the controversy over OK Corporation’s bid for Kansai Super Market, both of which remain fresh in our minds. Besides, late last year, pachinko equipment manufacturer Heiwa Corporation acquired Accordia Golf, the largest golf course management company in Japan. Earlier in 2012, Heiwa initiated a hostile TOB against Accordia through its subsidiary, PGM Holdings, Japan's second-largest golf course operator. Although the bid failed at that time, Accordia was subsequently transferred from one fund to another, and in the end, Heiwa achieved its goal of acquiring Accordia successfully.

As the growth potential of domestic demand declines, M&A deals among private companies will expand actively. The management of listed companies is expected to enhance corporate value by complying with the Corporate Governance Code and the Stewardship Code, which is essential for sustaining its value. What is required is the formulation of rational, highly feasible management strategies, as well as the capability to implement them. Inward-looking logic that is exclusive to one’s own members is no longer acceptable. I hope both Nidec and Makino will confidently demonstrate their competitive advantages in their respective business strategies to the capital market. That said, and while it is too late to say this now--- I can easily understand this was also part of the strategy---, was it really the best day for you, Nidec, to announce the hostile TOB on the eve of the ‘marvelous nine-day holiday’ during the year-end and New Year break?

This Week’s Focus, 1.26 – 1.30

Takashi Mizukoshi, the President