Major fashion apparel manufacturer World Co. said Monday it will proceed with a management buyout plan in a bid to turn itself into a privately owned company.
If World does delist, it would constitute Japan’s first management buyout not intended to restructure a company.
The move by the Kobe-based firm, which is listed on the Tokyo Stock Exchange and Osaka Securities Exchange, is apparently intended to keep hostile takeover bids in check, observers said.
Because its financial standing is solid and its foreign-ownership ratio is about 30 percent, World is regarded as a prime target for an unfriendly takeover.
Following the announcement, both the TSE and the OSE transferred the company’s stock to the monitoring post until further notice.
The buyout scheme will put World in the hands of its managers, who are targeting all outstanding shares except for those owned by the company itself. The buyout will involve roughly 67 percent, or about 30.99 million shares, and is expected to be worth some 220 billion, yen which would make it the largest management buyout in Japan.
The buyout will initially be carried out by a firm wholly owned by World President Hidezo Terai, with the list of shareholders to be expanded to other senior executives at a later date.
According to company sources, the roughly 11 percent stake held by current executives, including Terai and World founder Hirotoshi Hatasaki, is already set to be bought out, and talks with other large shareholders will be held in coming weeks.
The buyout period will start Wednesday and run to Sept. 1, with the purchasing price set at 4,700 yen per share, or some 25 percent higher than the current market price.
World, established in 1959, reported a consolidated pretax profit of 16.4 billion yen in the business year that ended in March, on sales of 245.1 billion yen.
The company’s move triggered various reactions from market players and legal experts, some of whom called it “the ultimate defense” against hostile takeover bids and put forth for the first time in Japan the significance of a public listing.
Lawyer Yoshihiko Fuchibe, an expert on corporate mergers, said it is rare for a company to adopt such a strategy, largely because companies are concerned about the demerits of delisting — the inability to procure funds from capital markets.
Only firms that have a huge supply of funds for the buyout, close-knit management and stable growth that ensures a stable source of funds in the future can use such a move, he explained.
Meanwhile, Kiyoshi Kimura, a director of the Japan Association for Individual Investors, said he did not view World’s move as a defense tactic.
“It is probably a strategic decision made from the viewpoint of long-term management,” he said. “Management wanted to focus on managing, rather than spend a lot of energy on information disclosure, which it has to do as a listed firm.”
Individual investors won’t complain if management buys the shares at a high price, Kimura added.
At the same time, however, the move drew criticism from some who said the strategy might undermine information disclosure and diminish the firm’s social responsibility because it eliminates the process of giving shareholders a say in what management does.
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