Hokuetsu Paper Mills Ltd., Japan’s sixth-largest paper firm, rejected a takeover bid Monday by Oji Paper Co., the country’s No. 1 paper producer, sticking to its planned capital and business tieup with trading house Mitsubishi Corp.
Oji publicly proposed Sunday acquiring Hokuetsu on condition that the smaller company scrap a planned alliance with Mitsubishi in which Hokuetsu would issue 50 million new shares to the trading firm.
In rejecting the Oji bid, Hokuetsu underscored its intention to team up with Mitsubishi in a document submitted to Oji on Monday morning, Hokuetsu officials said.
Later in the day, Mitsubishi also rejected Oji’s bid in a top-level meeting between the two companies, Oji President Kazuhisa Shinoda said at a news conference.
Mitsubishi said it has already reached an agreement with Hokuetsu on a capital tieup, and it is impossible to call it off, Shinoda quoted the Mitsubishi side as saying.
Oji’s plan calls for a tender offer for Hokuetsu shares lasting about a month, starting in mid-August, in which it would purchase a 50.1 percent stake in terms of voting rights.
Following the tender offer, Oji would acquire the remaining Hokuetsu shares through a share swap that would make Hokuetsu a wholly owned subsidiary of the larger paper maker.
If Oji succeeds in its takeover bid, its combined consolidated sales would total 1.36 trillion yen, surpassing those of Nippon Paper Group Inc., the country’s second-largest papermaker, by about 200 billion yen.
Hoping to strengthen its position in the face of a flood of cheap imported paper, Oji privately proposed a business integration with Hokuetsu on July 3.
But Hokuetsu rejected the offer, introducing takeover defenses July 19 and announcing Friday that Mitsubishi will become the company’s largest shareholder with a 24.4 percent stake, worth some 30 billion yen.
Hokuetsu said the issue of new shares will help it raise money to improve facilities at its factory in the city of Niigata.
In its statement rejecting the Oji offer, Hokuetsu emphasized the benefits of the alliance with Mitsubishi, saying that the major trading house’s international trustworthiness and strong trading network would help the firm grow.
Hokuetsu added it does not intend to take immediate defensive measures against Oji’s takeover bid.
Hokuetsu’s stock drew heavy buying Monday on the Tokyo Stock Exchange, ending the day’s session at a bid-only price of 735 yen, up from 635 yen at its Friday close.
Reflecting the minds of many stock traders Monday, one dealer at a major brokerage welcomed the move, saying the takeover bid may trigger realignment of the domestic paper industry.
Industry watchers say there are too many players in the industry and it lacks global competitiveness. Domestic demand peaked in 2000 as growth in cheap imports from Indonesia and China began to rise.
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