Japanese tech needs a little hostility

I’m not selling,” says the chairman of one of Japan’s biggest technology companies.
Let me grab some popcorn and a ringside seat for what I hope will be a hotly contested bidding war. Japan’s tech sector is ripe for further mergers and acquisitions. But the rarity of hostile takeovers means most deals feel like they’ve been hammered out over a polite lunch. This one could be different.
Toshiba Corp. already owns 52.4% of electronics-manufacturing equipment maker NuFlare Technology Inc. But Toshiba wants it all, so last month it made a public tender offer for the rest at 11,900 yen per share, a premium of around 49% above its 50-day moving average. Toshiba Chief Executive Officer and Chairman Nobuaki Kurumatani probably figured that his $596 million offer was a formality. He announced two other buyouts at the same time.
So after what looked like a rubber-stamp deal, Toshiba’s Kurumatani is now faced with a possible bidding war with a gadfly rival. And he’s digging in his heels. Hoya’s offer for NuFlare, at just 1,000 yen higher than Toshiba’s, barely seems serious.
But its announcement did have the effect of pushing NuFlare’s stock 13% higher as investors speculated Toshiba might need to offer more. Such a price battle is great news for those NuFlare shareholders who aren’t named Toshiba. It’s also good for the broader Japanese market.
Out of more than 3,100 M&As of Japanese firms tracked by Bloomberg in the past five years, only four are classified as “unsolicited.” The rest were considered “friendly.” None were “hostile.” That contrasts with 137 of more than 34,500 US deals that were not considered friendly. In other words, the rate of unfriendly offers in Japan is less than one-third of that in the US.
The result for deal values is palpable. US mergers and acquisitions over the past five years had a median transaction price of 2.67-times stockholder equity, double the 1.34 in Japan. Using another metric, the deals bid a median of 2.79-times book value versus 1.39. Kurumatani is probably aware of these statistics. He’s a former banker, brought in to revive Toshiba after it lost billions of dollars in a nuclear energy project.
Toshiba taking over NuFlare isn’t necessarily a bad thing, but it’s somewhat meaningless when you consider that it already holds a majority of the target.
By facing a hostile competitor, maybe Toshiba won’t take its existing portfolio of companies for granted and will instead be prompted to look further afield for places to spend its money.
—Bloomberg

Tim Culpan is a Bloomberg Opinion columnist covering technology. He previously covered technology for Bloomberg News