Info seputar SGP Hari Ini 2020 – 2021.

Stephen Givens is a corporate lawyer based in Tokyo.

At the end of July, after enduring eight months of dogged resistance from management, and 15 years after his arrest on dubious insider trading charges, Yoshiaki Murakami took control of Japan Asia Group (JAG) in what deserves to be recorded as Japan’s first successful hostile corporate takeover.

That this arguably historic moment has received little media attention reflects a paradox.

On the one hand, it is a welcome sign of progress that hostile takeover bids, which made headlines when Murakami first set his sights on targets like Tokyo Style and Nippon Broadcasting nearly two decades ago, have been normalized to the extent they are no longer front-page news.

At the same time, the media silence not only continues to withhold from Murakami the vindication he is due, but serves to give cover to the soft corruption Murakami surgically exposed in a failed gambit by management, with the assistance of professional facilitators, to take JAG private for less than half the price Murakami will pay to JAG’s shareholders.

In Nov. 2020, JAG released a 79-page document detailing a management buyout (MBO) led by private equity company The Carlyle Group and JAG President Tetsuo Yamashita, a former Ministry of Finance official and Nomura Securities banker and 14% shareholder.

The MBO, financed by Carlyle, would offer shareholders 600 yen per share, double the preannouncement share price, with Carlyle and Yamashita carving up pieces of the company between themselves after JAG was delisted.

JAG’s board solemnly endorsed the buyout price, despite Yamashita’s clear conflict of interest, based on the advice of a five-member “independent committee,” which in turn relied on a professional valuator’s “fairness opinion” and advice from one of Japan’s best-known law companies.

Sensing that Carlyle was rewarding Yamashita too generously with the spoils of an undervalued deal, Murakami began to buy JAG shares in the market. In January, Murakami announced that he was “contemplating” a counter-tender offer of 840 yen per share, which led to a comical act of unintended self-exposure.

On Jan. 26, the Carlyle-Yamashita consortium doubled the offer price from 600 yen to 1,200 yen per share, an unheard of bump just two months after shareholders had been assured that 600 yen per share was eminently “fair.” In return for funding a higher buyout price, Carlyle took back from Yamashita most of the post-transaction spoils that he had been allocated in the first version.

If Carlyle and Yamashita thought doubling the offer price would be a knockout punch, they were badly deceived. In a single ill-conceived blow, they managed to lose the confidence of JAG’s shareholders. At the deadline in February the MBO failed, with only 37% of JAG’s shareholders — including, presumably, Yamashita’s 14% — tendering their shares despite the doubled price.

A management buyout led by private equity specialist The Carlyle Group offering shareholders 1,200 yen per share failed, with only 37% of Japan Asia Group’s shareholders tendering their shares.

Having been exposed in their own botched MBO, one would have thought that JAG management would gracefully step aside and let JAG’s shareholders evaluate the terms of Murakami’s counteroffer for themselves

Instead, JAG management, without irony or shame, pulled out all the stops in resisting Murakami’s tender offer, ostensibly to protect their shareholders from a predator and not to advance their own interests.

In quick succession, JAG management deployed a series of defensive tactics.

First, Murakami was required to answer lengthy questionnaires about his intentions post-acquisition, questions that were never asked of the MBO consortium. After review, the JAG board recommended that Murakami’s offer be rejected because, among other reasons, a price in excess of 1,200 yen per share was now “inadequate.”

Next, the JAG board declared a 300 yen per share special dividend, a delaying tactic that forced Murakami to withdraw and refile his tender offer at a price exactly 300 yen per share less than his initial offer.

Finally, the JAG board approved a poison pill which, if triggered, would have wiped out the economic value of Murakami’s JAG shares. This led in June to three rounds of litigation and appeals in the Tokyo District Court and Tokyo High Court from which Murakami emerged victorious.

The courts ruled against JAG’s last-minute poison pill because the JAG board created it on its own authority without any provision for ratification by JAG’s shareholders — ratification that JAG management surely knew at the outset JAG’s shareholders would never give. Posing as protectors of shareholder interests, the JAG board sought unilaterally to take away from shareholders the decision to accept or reject a Murakami offer.

With the legal defeat, JAG management’s last line of defense was broken. In mid-July, after negotiating a face-saving 10 yen per share bump in Murakami’s offer price, the JAG board finally issued a formal endorsement of the Murakami bid.

Although definitions are a bit tricky, Murakami’s takeover of JAG deserves a place in the record books as Japan’s first successful hostile takeover, at least by a financial bidder — as opposed to a strategic competitor in the same industry as the target.

Japan and the Japanese establishment owe Murakami recognition for the transformation he has helped bring about in the market for corporate control. Thanks to Murakami, the landscape and attitudes that would have been unthinkable in 2002, when Murakami launched his unsuccessful bid for Tokyo Style, prevail today.

It is unlikely Murakami will one day be awarded the imperial decorations routinely bestowed on retired civil servants and former company presidents, but he deserves at least a collective “Otsukaresama.” (“Thank you for your hard work.”)