July 20, 2005
Fuji, Livedoor, and Japan's Version of a Takeover Battle
Now that the dust has cleared on Japan first true hostile takeover attempt, Liverdoor's attempted takeover of Nippon Broadcasting Sytem (NBS), there is tangible evidence on the plight of a Japanese shareholder. It is not pretty.
In late 2004 Takafumi Horie, owner of an upstart internet firm Livedoor announced that he would buy control of a Fuji TV radio affiliate, NBS. Horie was young, did not wear a suit, and captured the imagination of Japan's young high-tech types. Fuji fought back and cut a deal, green mail. Fuji bougt Liverdoor shares in NBS at a slight premium and bought a stake in Livedoor as well. Livedoor shares dropped 25 percent on the news. NBS adopted, and other Japanese companies are rushing to enact, an Amercian style "poison pill" plan.
Whatever justification there may be for "poison pill" plans in the United States (to give the target managers the power to bargain for a higher price), the justification is absent in Japan. Japenese firms often poor returns on capital and have complex cross-shareholdings in each other that make shareholder accountablily next to impossible. The poision pill plans are for entrenchment not for maximizing shareholder value.
The value of poison pill plans is very context specific. Japan's history of ignoring shareholder value is a bad setting for their use (abuse).
July 20, 2005 | Permalink
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