Hokuetsu Kishu Paper Co. has become the top shareholder of bigger rival Daio Paper Corp., with an equity stake of more than 20 percent.
Hokuetsu Kishu, previously the fifth-biggest paper manufacturer in the country, raised its stake in fourth-ranking Daio to 22.29 percent from 2.86 percent in terms of voting rights by purchasing all shares held by Daio’s founding family, the company announced Wednesday.
The move makes the Hokuetsu Kishu-Daio pair the third-biggest player in the paper-pulp industry in terms of sales. The leader is Oji Paper Co., followed by Nippon Paper Group Inc.
Combined group sales at Hokuetsu Kishu and Daio in the year that ended last March stood at about ¥640 billion, compared with ¥1.2 trillion for Oji and ¥1 trillion for Nippon Paper.
Hokuetsu Kishu and Daio will upgrade a joint committee set up in 2006 in line with the launch of their capital and business tieup. The panel will discuss further steps to strengthen their alliance.
Daio fell into scandal last autumn when it was revealed former Daio Chairman Mototaka Ikawa, a member of the founding family, had borrowed huge amounts of money from Daio group companies to cover his gambling losses. This put Daio’s management at odds with the founding family.
After Hokuetsu Kishu mediated between the two sides, the founding family decided to sell its holdings of Daio shares and group companies to Hokuetsu Kishu.
The founding family on Wednesday used proceeds from the share transaction to make up for Ikawa’s remaining ¥5.3 billion in debt. This is expected to boost Daio’s group net profit for the current fiscal year ending in March 2013 by about ¥900 million.
Also Wednesday, Daio acquired most of the shares in its affiliates that had been sold to Hokuetsu Kishu by the founding family. The number of Daio subsidiaries has thus returned from 19 to 37, the same as before the scandal broke.