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No unfriendly M&A please, we’re Japanese

Mergers and acquisitions are the hot topic in Tokyo as corporate Japan shifts into investment mode. And although Japan’s M&A market is flawed, structural changes are slowly under way and global bulge-bracket firms will be the ­ultimate winners. Chris Leahy reports.

Change is coming – but not in a rush

HOSTILE TAKEOVERS ARE hardly life-changing events for investment bankers but Oji Paper’s aggressive bid for rival Hokuetsu Paper Mills in July 2006, arguably Japan’s first ever hostile takeover attempt, was different.

“It was one of the most exciting days of my life,” says the head of M&A at a US bulge-bracket bank, “I really thought it would be the start of hostile bids in Japan.”

Alas for bankers in the Tokyo M&A departments of other global investment banks, it was not to be. Within weeks, Hokuetsu had outmanoeuvred Oji Paper simply by selling blocking stakes to Mitsubishi Corporation and Nippon Paper: deals that had no industrial logic but effectively scuppered the Oji Paper deal.

“It’s very hard to orchestrate a successful hostile bid in Japan,” says John Ozeki, head of M&A at JPMorgan in Japan. “It’s very unfortunate: hostile takeovers can really open up the equity market.”

Few bankers are predicting a flood of hostile bids in Japan despite the seminal move by Oji Paper. However, the deal was no less important for that, say bankers.

“While I don’t expect a flow of overtly hostile bids any time soon,” says Steven Thomas, managing director and co-head of Japan M&A at UBS, “where people put logical and sensible ideas to companies that are rebuffed by management, they may seek to put their proposals directly to shareholders.”

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