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Menswear retailer Futata Co. said Friday it will accept Konaka Co.’s offer to make it a wholly owned subsidiary, rejecting menswear rival Aoki Holding Inc.’s proposal.

Futata said it chose Konaka because it “has built a relationship of mutual trust (with Konaka) as we have been allied for the last 3 1/2 years” and there is a “high affinity between the corporate cultures.”

Aoki immediately withdrew its takeover plan, saying it had wanted a “friendly integration.”

Konaka said it will start negotiating soon the details of the buyout.

Futata had been deliberating the tender offer made Aug. 7 by Aoki, the second-largest menswear chain in Japan, and a counterproposal announced Aug. 14 by Konaka, the fourth-largest chain and Konaka’s largest outside shareholder with a 20.2 percent stake. Konaka and Futata formed business and capital alliances in 2003.

The major menswear retailers are interested in the Fukuoka-based Futata because they do not have presence in Kyushu.

Sumitomo Mitsui Banking Corp., which has been advising Futata, supported Konaka’s proposal in an analysis of the two proposals delivered Friday morning.

The menswear industry tussle drew public attention as Aoki’s proposal came just days after Oji Paper Co. launched an unprecedented hostile takeover bid in the pulp and paper industry to acquire Hokuetsu Paper Mills Ltd. The two events are being seen as a strong indication that Japan is entering an era of corporate mergers and acquisitions.

Both Aoki and Konaka said they had no intention of attempting hostile takeovers. But the takeover plans raised interest as the two firms offered different proposals.

Aoki promised that it would not cut jobs or cut wages, but would close unprofitable outlets to turn them into other businesses, including karaoke lounges, and staff them with people from the menswear stores.

Konaka winning bid says Futata should stick to the menswear business and not force its employees into new businesses.

In an effort to get ahead of Aoki’s public tender offer slated for late August, Konaka announced its buyout plan Wednesday to acquire Futata shares through a stock swap. Under the plan, 23 Futata shares will be swapped for 10 Konaka shares.

Aoki’s plan was to offer 700 yen per share with the aim of acquiring all of Futata’s outstanding ordinary shares to make the firm a wholly owned subsidiary.

Aoki had argued that the Futata-Konaka tieup was not producing results, given the drop in Futata’s revenue despite opening new outlets. Konaka claimed that Futata’s earnings have been improving, thanks to the synergy between the two companies.

Futata’s shares have been experiencing turbulent movements in stock prices since Aoki announced the takeover plan. The price surged to 825 yen on Tuesday as investors expected Aoki to raise its offer for takeover bid. Futata’s last traded price before the announcement was 400 yen. The stock closed at 720 yen on Friday.

Aoki initially had asked Futata to respond to its proposal by Monday, but Futata had asked for the deadline to be postponed until Friday so it could have more time to study the two proposals.

“I still believe our proposal was better than the one presented” by Konaka, Aoki President Hironori Aoki said with disappointment at a news conference after Futata’s announcement.

“But I take pride in the way that we made all information concerning our proposal open and transparent and led the way into a new era” of large-scale corporate mergers and acquisitions, he said.

The president of Aoki has a 4.8 percent stake in Futata but did not say whether he would sell them to Konaka. If he doesn’t, Konaka will not be able to make Futata a wholly owned subsidiary.

Aoki said it attempted the takeover because the business environment in menswear will soon become harsh, due in part to the mass retirement of baby boomers.

“The industry needs a dynamic transition,” Aoki said. “You can’t survive if you stick to a conventional business model.”

Information from Kyodo added

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