Hokuetsu Paper Mills Ltd., the nation’s sixth-largest paper maker, said Wednesday it has asked an independent panel whether it should take measures to thwart a hostile takeover bid launched by Oji Paper Co. the same day.

Hokuetsu also asked shareholders not to sell their shares to industry-leader Oji.

The measure under consideration is the issuance of equity warrants that will allow Hokuetsu shareholders other than the bidder to double their shareholdings, which would dilute Oji’s voting rights and make it difficult to take control of Hokuetsu.

Oji would likely file for a court injunction if Hokuetsu adopts the measure.

The Tokyo Stock Exchange has criticized Hokuetsu for failing to give shareholders sufficient information about the measure, which was aired in June at its general shareholders’ meeting.

Oji, Japan’s largest paper maker, sprung the surprise 800 yen per share bid Wednesday, kicking off an unprecedented takeover battle between two major domestic companies. The offer is good through Sept. 4.

At a board meeting the same day, Hokuetsu again rejected an earlier proposal to merge with Oji in favor of a capital tieup with major trading house Mitsubishi Corp., approving the private placement of 30 billion yen in new shares with Mitsubishi.

Oji is aiming to acquire a controlling stake of more than 50 percent in Hokuetsu, then make it a wholly owned subsidiary through a stock swap.

If the takeover succeeds, the combined firm would be the fifth-largest pulp and paper maker in the world in terms of sales.

Daio Paper Corp., Japan’s third-largest paper maker, will file a complaint with the Fair Trade Commission this month on grounds that the merger would run counter to the antimonopoly law, Daio officials said.

The 30 billion yen share issue to Mitsubishi, slated to take place Monday, will give the trading company a 24 percent stake in Hokuetsu in terms of voting rights and effectively block Oji’s takeover plans.

On the TSE, Hokuetsu drew strong interest Wednesday, ending the trading session at 814 yen, up 30 yen from Tuesday’s close and surpassing Oji’s offering price of 800 yen. Oji shares rose 14 yen to close at 681 yen.

Oji initially offered 860 yen per share for Hokuetsu but lowered that to 800 yen in light of the possible share issue to Mitsubishi. Oji has said it will raise its offer to 860 yen if Hokuetsu cancels the share issue.

Mitsubishi released a statement Tuesday night saying it will go ahead with the planned purchase of new Hokuetsu shares as scheduled.

Oji said its business integration proposal does not meet the conditions set by Hokuetsu for initiating antitakeover measures because it has provided sufficient information and due time for Hokuetsu’s management to consider the proposal.

Oji is seeking to acquire at least 100.82 million Hokuetsu shares for 80.6 billion yen, or 800 yen per share, to take a controlling stake in the company. Oji has not set a ceiling on the number of shares it will try to buy.

The acquisition offer was made to Hokuetsu on July 3, but Hokuetsu rejected it and announced on July 21 that it would to allocate 50 million new shares to Mitsubishi for 607 yen per share and form a tieup with the trading house.

On July 23, Oji said it would make a tender offer of 860 yen per share for Hokuetsu around mid-August.

But after Hokuetsu repeatedly rejected its overtures, Oji cut its price, accelerated its schedule and launched the hostile bid Wednesday.

In a time of both misinformation and too much information, quality journalism is more crucial than ever.
By subscribing, you can help us get the story right.