Hostile bids likely to up MBOs: Carlyle exec

by Mariko Yasu and Kazu Hirano

Bloomberg

Management buyouts in Japan may increase as companies rush to fend off hostile takeovers, Carlyle Group’s top executive in the nation said.

“More corporate managers are seriously wondering if it’s worthwhile for their companies to remain public,” Tamotsu Adachi, Washington-based Carlyle’s Japan representative, said Wednesday.

Hostile bids by investors, including Warren Lichtenstein’s Steel Partners Ltd., and pressure to raise returns from activist shareholders may encourage companies to seek deals with private equity, Adachi, 53, said, adding Carlyle invests only on friendly terms.

General meetings in June drew 85 motions from shareholders, including The Children’s Investment Fund, almost double the 47 made a year earlier, according to Glass Lewis & Co., a shareholder adviser.

Carlyle may seek to play the role of white knight, Adachi said, and bail out threatened companies such as Bull-Dog Sauce Co., a Japanese condiment maker that’s battling a hostile bid by Steel Partners Japan Strategic Fund L.P.

“If a troubled company seeks collaboration with us, and we believe it has growth potential, we might agree to play that role,” Adachi said. Some firms are now in discussions with Carlyle to carry out restructuring, he said, declining to name the companies.

Food processors, electronics makers and regional banks are among industries in Japan that remain inefficient and in need of consolidation, Adachi said, noting they attract hostile bidders seeking to boost returns.