Deciding on the best defense
(From The Japan Times June 12 issue)

「毒薬」の利用は慎重に

A poison pill is a defensive measure a company takes to make it less attractive for acquisition during a hostile takeover attempt. The measure may include issuing new shares to existing shareholders to dilute the accumulated stake of a hostile bidder. The lesson from the Fuji-Livedoor battle has prompted many companies to consider whether to use a poison pill.

Even Toyota Motor Corp., whose massive aggregate market value makes it an unlikely target of any hostile takeover bid, is reported to have considered various defensive measures.

In March, Nireco Co., a maker of high-tech measuring devices and controllers, became the nation's first company to adopt a poison pill tactic. But on June 1, the Tokyo District Court issued a provisional injunction blocking the measure, and then confirmed the order June 9. The request for the injunction had been filed by SFP Value Realization Master Fund Ltd., a Cayman Island-based investment company that owned 6.8 percent of Nireco's shares as of May 9.

Although Nireco has appealed the June 9 decision to the Tokyo High Court, the lower court decision apparently has poured cold water on company executives' efforts to find creative ways to fend off hostile takeovers. They will have to live through a period of trial and error.

On March 14, Nireco's board had endorsed the issuance of share warrants to dilute stock in case of a hostile takeover attempt. Specifically, the measure would offer all shareholders registered as of March 31 the opportunity to buy two new shares for each one they owned for ¥1 each in the event that a perceived aggressor bought 20 percent of Nireco shares.

In filing its injunction request, SFP asserted that the sudden threefold increase in the number of Nireco shares could cause the share price to plunge and result in large losses for shareholders. The court focused on the following points: Did Nireco's poison pill tactic contain a mechanism that would reflect the will of shareholders expressed at a future meeting? Did it contain a mechanism that prevented Nireco's board from deciding arbitrarily to activate the poison pill?

Finding that Nireco failed both tests, the court decided that the poison pill tactic was unfair because it could cause unforeseen financial losses to existing shareholders.

In accordance with the guidelines issued jointly May 27 by the Ministry of Economy, Trade and Industry and by the Justice Ministry concerning defense plans to fight off hostile takeover bids, the court apparently places priority on the interests of existing shareholders and seeks to lay down strict conditions for activating a poison pill. It appears to want to put the brakes on excessive defensive measures.

The message from the guidelines and the court decision seems to be that authorities will not accept defensive measures ostensibly aimed at protecting executives' jobs. Thus the view is spreading even among executives that there is no need to hurriedly introduce such measures that risk violating the rights of existing shareholders.

Some companies are considering leaving the decision on whether to activate a defense mechanism against hostile takeover bids to outside board members, to prevent the mechanism from appearing only as a measure to serve the interest of executives. The problem for a company, though, is finding independent outside people who can properly decide, as board members, when a proposal for a takeover is a constructive one that could increase corporate value.

As for the introduction of a poison pill, there is a technical question related to Japanese tax law. Authorities are said to be inclined to further tax shareholders who acquire new shares by exercising warrant rights. If the fear of additional taxes were to inhibit issuing share warrants, the poison pill would not function as expected.

There is a view that, until the tax question is settled, it will be difficult for companies to introduce poison pills. So far, there have been no cases in which a Japanese company equipped with a poison pill has become a target of a hostile takeover. Each company will need to accumulate experience to decide what type of defensive measure against a hostile takeover bid is most appropriate. The bottom line is that defensive measures should not be used as tools merely to maintain the interest of existing executives. And such measures should not be used to block a constructive proposal from new bidders.

The Japan Times Weekly
June 18, 2005
(C) All rights reserved

      これは、企業が敵対的買収の対抗策として、既存株主に対し、買収が仕掛けられた場合に行使できるという条件で新株予約権を大量に発行するものだ。権利が行使されると、発行株式総数が急増、買収には莫大な費用が必要になるという仕組みである。

      今回の騒動で、トヨタ自動車など多くの企業が敵対的買収対抗策の導入を検討しているという。

      計測機器メーカー、ニレコは3月に、国内企業で初めて「ポイズンピル」を導入した。しかし東京地裁は6月1日、同社の株主であるケイマン諸島の投資ファンドSFPが予約権発行の差し止めを求めた仮処分申請を認める決定をした。さらに同地裁は9日、ニレコの異議申し立てを却下した。

      ニレコの取締役会は3月14日、新株予約権の発行を承認した。これは、敵対的買収者が同社株の20％を取得した場合、3月31日現在の株主に所有株1株につき2株を各1円で割り当てるというものだった。

      SFPは仮処分申請で、「ポイズンピル」の発動でニレコの発行株数が3倍になれば、株価は急落し、株主に大きな損害を与えると主張した。東京地裁は主張を認め、「ポイズンピル」は公正を欠くと判断した。

      東京地裁は、経済産業省と法務省が発表した敵対的買収の対抗策についての指針に従い、既存株主の利益を優先し、ポイズンピル発動には厳しい条件をつけた。

      一部の企業は、ポイズンピルが役員の利益を図るのではないことを示すため、措置の発動権限を社外取締役に委ねることを検討しているが、問題はその社外取締役に独立性があるか、買収が企業の価値を高める建設的なものか否かを判断できるかである。

      また、新株予約権を行使する株主に課税するかどうかも問題だ。新株発行が課税の可能性で抑制されるとすれば、ポイズンピルは予想されるような効果を上げないだろう。

      敵対的買収の対抗策は、現経営陣の利益を図る手段、建設的買収を阻止する手段にすべきでない。