Business

Boardroom tussles reflect changes in M&As

by Taiga Uranaka

The decorum traditionally seen in Japan’s mergers and acquisitions has broken down, as hostile takeover attempts have grabbed the spotlight.

The latest boardroom row, between Origin Toshu Co. and Don Quijote Co., stems from a Don Quijote bid to acquire Origin shares after the discount retailer’s earlier failed takeover bid.

Don Quijote, known for its quirky store layout and inventory, surprised the market Wednesday when it revealed it had acquired an additional 15.28 percent stake in Origin after its failed takeover on Feb. 9.

Don Quijote’s total stake in the boxed-meal chain now stands at 46.21 percent.

It has said it will keep buying Origin shares on the open market until it holds 51 percent of the firm, whereupon it will make Origin a subsidiary.

Origin reacted fiercely, contending the move was designed to elude takeover rules, which apply whenever an acquiring entity obtains more than a one-third stake in a company through off-market purchases.

“We are currently compiling documents of facts related to this case with our lawyers, and . . . plan to submit them to the Securities and Exchange Surveillance Commission next week,” said Masaru Onishi, general manager of the office of Origin’s president.

Don Quijote’s additional acquisition was made secretly through regular purchases on the market, where takeover regulations do not apply.

But Origin argues Don Quijote should have followed those rules anyway because the stock purchases are an integral part of the firm’s efforts to obtain more than a one-third stake, with its original 30.9 percent stake bought off-market.

For its part, Don Quijote said the purchase after its failed bid should be considered a separate transaction from its original bid.

“There is no blemish” in the transaction, the firm’s chief financial officer, Mitsuo Takahashi, reckoned.

Origin considers Don Quijote’s tactics underhanded because the latter publicly conceded defeat and it said it would not attempt another takeover.

The wrangling is likely to continue, providing food for thought for the country’s regulators, who have been on tenterhooks thanks to Livedoor Co., which epitomized a new breed of players ready to take advantage of shortcomings in Japan’s capital market regulations.

Meanwhile, with nearly 50 percent of Origin stock in Don Quijote’s hands already, Aeon’s ability to act as a white knight for Origin is being tested. Aeon officials said the retailer has not yet decided on a response to Don Quijote’s latest move.

If Don Quijote’s acquisition succeeds, it will offer a rare case study of how hostile takeovers affect a target’s operations and employee morale.

Origin’s labor union has gone along with management in endorsing Aeon’s bid.

“It is a big challenge for us,” Don Quijote’s Takahashi said. “Retail business depends heavily on people. Employee morale is vital.”

Still, he said the company will try to win acceptance of the bid from Origin employees through talks.