Investment firm felt compelled to sell Tokyo Kikai stake after ‘poison pill’ says CEO

TOKYO, March 10 (Reuters) – The Japanese investment firm that failed to break a “poison pill” defense in its bid for a printing company had no choice but to sell the most of its stake at a loss or risking a battle that 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 to a group of newspaper publishers led by Yomiuri Shimbun, ending its unsolicited bid for the 106 year old company. Read more

“We were doomed to lose if we continued our fight with the management of Tokyo Kikai,” 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.”

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His comments follow an intense legal battle at Japanese companies over the past year that illustrates the high hurdles unsolicited offerings still face in the country’s capital markets and potentially setting a precedent for similar offerings. Read more

Wong accepted Yomiuri’s offer to buy the 32% stake, he said, believing he was unlikely to win support from Yomiuri and other newspapers if he rejected the deal. offer. Without the support of powerful Japanese newspapers – the Yomiuri is one of the largest newspapers in the world in terms of circulation – Tokyo Kikai’s printing business could struggle, he said.

Yomiuri told Reuters in a statement that the sales talks began at the request of Asia Development and not Yomiuri. He said the confrontation between Tokyo Kikai and Asia Development was “clearly irreparable” and that acquiring the shares of the media companies was “the only option to normalize the situation and put Tokyo Kikai’s management on the path to stability. “.

A poison pill is a strategy designed to thwart hostile takeovers whereby other shareholders obtain new shares in the company, diluting the suitor’s stake.

Last year, Japan’s Supreme Court ruled against Asia Development, which had tried to block Tokyo Kikai from issuing a poison pill defense. Read more

As a result, Asia Development had to reduce its stake from 40% to just under 33% or risk massive dilution. In the end, it sold much 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 has been closely watched by investors as a gauge of the legal future of potential hostile bids. As corporate governance has improved in the world’s third-largest economy, hostile offers – once taboo – have become somewhat more common.

Wong, who first came to Japan as a student and is fluent in Japanese, said he believed the remaining 8% investment returns would eventually make up for the 1.6 billion yen loss.

He said management had made Tokyo Kikai less attractive as the previously profitable company posted a loss of 969 million yen in the nine months to December.

Asia Development had previously tapped Tokyo Kikai to scale up its business by helping the newspaper industry digitalize and find new investment opportunities.

Tokyo Kikai said in a statement to Reuters that it would strive to increase company and shareholder value by committing to supporting the newspaper industry and serving the public interest.

Shares of Tokyo Kikai are down about 30% this year after more than quadrupling last year.

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Reporting by Makiko Yamazaki; Editing by David Dolan and Sam Holmes

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