Ipreo in the News
17 June 10
Firms Making Takeover Defenses More Transparent
TOKYO (Nikkei)--Companies are increasing the transparency of their takeover defense measures as they are growing more conscious of investor disapproval of such systems.
At this year's shareholders meetings in Japan -- most of which take place in late June -- about 180 companies are seeking approval to renew their takeover defenses. Since the beginning of 2010, more than 20 firms have said they will drop their defense measures. Some companies will ask their stockholders to decide whether the defense systems should be renewed.
Fujifilm Holdings Corp. (4901) is one of the firms hoping to get stockholder approval to renew its takeover defense procedures.
In early May, the company revised the procedures, reducing the time period within which the board of directors must respond to a request for information from the independent committee -- a body tasked with deciding whether a takeover defense should be mounted.
The change was made to reflect shareholder opinion collected during visits to institutional investors, according to a company official.
Morinaga Milk Industry Co. (2264) also made changes. It set a cap on the number of days the company can extend the period in which it studies a takeover proposal, and made clear that the period cannot be re-extended.
Still, institutional investors dislike takeover defenses.
A survey by market intelligence company Ipreo Japan LLC found that about 40% of overseas investors with large holdings of Japanese shares said they are, in principle, against introducing such measures.
They are concerned that defense procedures could allow a company's management to avoid replying to a takeover proposal without good reason.
As of the end of May, 551 companies in Japan had takeover defense measures, according to M&A consultancy Recof Corp. Many firms are looking to obtain shareholder approval to continue them, though the global financial crisis has significantly reduced the possibility that foreign funds will attempt hostile takeovers.
An official of a precision machinery manufacturer said the company maintains its defense system because it fears being taken over by a buyer from an emerging economy.
Another reason prompting firms to remain guarded is a decline in the number of shares owned by stockholders that typically hold them for an extended period.
The quantity of such shares is decreasing because companies are unwinding crossholding arrangements to prepare for the introduction of international accounting standards, and because corporate leaders who own large stakes in their firms are unloading their shares.
Ultimately, a company's most powerful takeover defense is raising its stock price by, for example, presenting a convincing growth strategy. Some investors, including Nomura Asset Management Co., oppose firms with a low return on equity seeking to adopt takeover defense measures.
Companies that hope to maintain their takeover defense procedures will have to provide explanations sufficient to gain shareholder approval.
(The Nikkei June 17 morning edition)
