by Oji Paper Co., Japan's largest paper producer, for Hokuetsu Paper Mills Ltd., the nation's sixth-largest paper maker, was Japan's first-ever hostile TOB mounted by a major company against a domestic rival. The bid eventually failed as Oji President Kazuhisa Shinoda admitted Aug. 29 that the deal was heading "infinitely in the direction of a miscarriage." After its foiled attempt to merge with Hokuetsu, Oji will try to improve its competitiveness on its own -- by independently investing in new facilities.
As some of its facilities are near the age for scrapping, Oji had paid attention to Hokuetsu's plan to install new equipment in its Niigata factory. So, in March, Oji privately made a merger proposal to Hokuetsu, followed by an official proposal July 3. Hokuetsu President Masaaki Miwa turned it down July 23 after meeting with the Oji side. Oji then made the merger proposal public the same day, before announcing the TOB plan Aug. 1.
In Japan, where business deals depend on building consensus through negotiations, Oji's TOB was unprecedented. Even so, Oji may not have been completely free of traditional thinking. Its initial step-by-step, behind-the-scenes approach may have given Hokuetsu enough time to outmaneuver Oji.
On July 21, two days before Mr. Miwa's meeting with the Oji side, Hokuetsu announced a defense plan -- to issue 50 million new shares at 607 yen per share to Mitsubishi Corp., Japan's top trading house, which had indicated it wanted to strengthen its position in the nation's paper market.