Hokuetsu Kishu Paper Co. is considering buying up all the shares of Daio Paper Corp. held by the scandal-hit firm’s founding family, sources said Wednesday, adding that doing so would make it the top shareholder with a stake of about 20 percent.
The nation’s fifth-largest paper manufacturer currently has 2.85 percent of outstanding shares in fourth-ranked Daio Paper. Talks on the matter are in their final stages, the sources said.
A tieup would create the nation’s third-largest paper-manufacturing group and possibly increase the companies’ chances of survival as the Internet continues to dampen demand for paper.
Oji Paper Co. is the current leader in the Japanese paper market, followed by Nippon Paper Group Inc.
The move comes as Daio management prepares to sever ties with its founding family following the revelation that former Chairman Mototaka Ikawa, a member of the family, lost much of the money he borrowed from Daio Paper group companies. Daio Paper will hold a general shareholders’ meeting on June 28.
The founding family will sell its Daio Paper shares to Hokuetsu Kishu for about ¥10 billion, the sources said. Proceeds from the sale are expected to be used to repay Daio Paper affiliates plundered by Ikawa. Of the loans totaling ¥10.6 billion, ¥5.2 billion has not been repaid.
The founding family also plans to sell shares in Daio Paper group companies to Hokuetsu Kishu, according to the sources.
The enhanced alliance between Daio Paper and Hokuetsu Kishu could trigger a fresh round of realignments in the industry.
Hokuetsu Kishu, which has strength mainly in printing paper, posted group sales of ¥230.5 billion and a net profit of ¥12.7 billion in fiscal 2011 that ended in March. It has a workforce of 1,200 on a parent-only basis.
Daio Paper, established in 1943 and known for its Elleair-brand tissue and toilet paper, has the biggest market share for household-use paper products.