The management buyout of a small green power and tech group has put one of the world’s largest private equity firms, Carlyle, on a collision course with the family of the most activist investor. notorious of Japan.
The looming clash comes as some analysts predict that after decades of submissive investors and a near-total absence of hostile takeovers, Japan is on the brink of change as companies are forced to respond to activist shareholders and fiercer competition for assets.
The expected brawl over the Japan Asia Group (JAG) will force Carlyle to manage funds managed by family members of Yoshiaki Murakami – a now Singapore-based investor who critics often accuse of using “greenmail” tactics on them. small threatening a takeover and forcing the owners to repel the attack by buying them back at a premium.
The battle centers on Carlyle’s backing for a 37 billion yen ($ 356 million) buyout of JAG and its affiliates. It will offer ¥ 600 per share, a 75% premium over JAG’s closing price a day before the November 5 announcement.
Despite the size of the premium, analysts said the offer was about 35% below JAG’s tangible book value. The stock closed at ¥ 759 on Friday, 26% above Carlyle’s bid.
The Carlyle-backed MBO is the latest in a wave of trading in Japan by the world’s largest private equity groups as traditional barriers begin to crumble and company executives begin to question the advantage of staying listed.
Some companies, such as Bain and KKR, have focused on sales of important assets by company founders and companies from conglomerates seeking to streamline their operations. Carlyle and others have focused their attention on the thousands of small companies with unclear succession or other reasons for wanting to sell to private equity.
Besides the increase in transaction volume, the environment has also changed: a taboo against unsolicited offers, which removed competition on asset prices, began to evaporate. Earlier this month, the management of Shimachu Homes were forced to change their offer recommendation to shareholders after a higher unsolicited offer arrived.
A brief released Thursday showed that Tokyo-based City Index Eleventh and Mr Murakami’s son-in-law had acquired a combined 6.1% stake in Japan Asia Group. Tokyo traders said recent market activity suggested funds linked to Mr Murakami may now collectively own at least 20% of JAG, but that they would not need to disclose it for several days.
City Index sent letters to the JAG in the past two weeks arguing that Carlye’s offer was too low, according to Hironaho Fukushima, who runs the fund.
“In a management buyout like this where the company is going to be delisted, ousted shareholders like us can only look to the price,” Fukushima told the Financial Times.
“We will be looking at various options,” he added. Previously, Mr Murakami and a group of at least five funds run by his family members threatened hostile takeover bids and extraordinary meetings to put pressure on companies in which they have invested.
The JAG declined to comment when asked if it would consider increasing the offer. Carlyle also declined to comment on the deal.