Japan's industry ministry will spell out that companies may lawfully rebuff unsolicited takeover offers even when such offers include substantial premiums, a senior ministry official said, as Tokyo grapples with growing anxiety about the targeting of major Japanese firms by activist investors and overseas buyers.
The Ministry of Economy, Trade and Industry (METI) plans to highlight this principle in an upcoming revision to its merger and acquisition code, scheduled for May. The change comes as the government balances a push for healthier consolidation and shareholder accountability with concerns about preserving critical technology and preventing asset stripping.
"The board has the right to say no, if it believes that incumbent management can better enhance corporate value, or if it judges that a buyer could later engage in asset stripping or extract technology," said Hiroyuki Sameshima, director at METI's corporate system division. Sameshima added that the update is not intended to encourage defensive takeover measures by companies.
METI originally introduced a code of conduct for M&A three years ago aimed at curbing excessive defensive tactics and fostering constructive industry consolidation. Since that introduction, Corporate Japan has experienced a wave of unsolicited takeover offers, a trend that the ministry says the forthcoming guidance will address by clarifying the board's discretion.
At the same time, there is rising unease within the government led by Prime Minister Sanae Takaichi - who won a landslide election victory on Sunday - that sensitive technologies could fall under foreign control through hostile or unsolicited deals. That concern has influenced the tone of METI's planned update to the merger code.
Sameshima emphasised that shareholders ultimately retain the power to judge which plans are more credible, based on the disclosure provided by both company boards and prospective bidders. "I want to be clear that the purpose of this update is not to encourage companies to implement takeover defence measures," he said, noting also that the clarifications are unlikely to halt the rise in unsolicited bids.
Market activity has been robust. Mergers and acquisitions involving Japanese firms reached a record 35.7 trillion yen last year, according to Recof Data. Of the unsolicited approaches launched, there were eight such bids in the period cited, with roughly half resulting in successful takeovers.
Notable recent cases include Taiwan's Yageo, which made a successful unsolicited bid for Shibaura Electronics last year, marking a high-profile cross-border transaction. In contrast, Canada's Alimentation Couche-Tard withdrew its bid for Seven & i, citing a lack of engagement from the target.
Observers and academics expressed mixed views on the effects of METI's guidance and the broader M&A climate. "While M&A guidelines have made management more conscious of share prices, there have been takeover cases where the acquirer’s managerial capability is questionable," said Kazunori Suzuki of Waseda Business School.
Suzuki suggested that expanded disclosure from bidders about assumptions underpinning their proposals - for example, expected sales growth and planned cost reductions - would aid stakeholders in assessing the feasibility of offers. He also cautioned that it would be difficult to stop shareholders who are primarily seeking to exit at a high price from tendering their shares.
($1 = 156.7000 yen)