Tokyo, Aug 8 - U.S. hedge fund Steel Partners pushed ahead with its $260 million bid for Bull-Dog Sauce Co., recasting its offer to try to by-pass a 'poison pill' defence that was heavily backed by the Japanese sauce maker's shareholders.
Steel Partners slashed its bid by three-quarters to 425 yen per share from 1,700 yen to account for millions of new shares being issued by Bull-Dog in a defence strategy that survived a challenge by the hedge fund in Japan's Supreme Court.
Japanese companies are already protected from the cut and thrust of western-style capitalism by a system of cross-shareholdings with friendly firms, and poison pills give them another line of defence.
But some financial analysts fear the court ruling may erode investor appetite for the Japanese equity market, and even the government appears cautious about poison pills.
"This type of takeover defence may also end up preventing acquisitions likely to improve corporate value," said strategist Kengo Nishiyama at Japanese brokerage Nomura Securities in a note.
Steel Partners gave shareholders two more weeks to consider its bid, but it now faces an almost impossible task to win control of Bull-Dog, a 105-year-old maker of a Worcester sauce Japanese love to pour over pork cutlets.
If it does so, it would be Japan's first successful hostile takeover.
UPHILL STRUGGLE
Bull-Dog's move will slash Steel Partners' holding to less than 3 percent from the previous 10 percent, and the fund has still to win over other shareholders -- 80 percent of whom voted in June to approve the target company's defence strategy.
The poison pill will take effect on Thursday, when Bull-Dog plans to allocate new shares in exchange for stock rights it had issued to all shareholders that more than trebled the number of its outstanding shares.
However, it plans to buy back Steel Partners' stock rights rather than let the predator maintain its shareholding level.
Bull-Dog forecast a net loss of 980 million yen for this fiscal year due to the cost of its poison pill measure.
Steel Partners has extended its offer to Aug. 23 from Aug. 10 to allow investors to mull its revised bid, although the value of the offer remains the same.
As a hedge fund, Steel Partners screens stock markets for companies it believes are undervalued. It still believes Bull-Dog is undervalued and, even though it is highly unlikely to win control, the fund is hoping some shareholders will tender their shares.
It will have to convince shareholders to ignore a Japanese court's labelling of the fund as an "abusive acquirer" - a harmful epithet in a country where maintaining harmony is often considered of paramount importance.
Following the announcement by Steel Partners, the Tokyo Stock Exchange halted trading in Bull-Dog shares, which closed on Tuesday at 630 yen, well down on the year high of 1,776 yen hit mid-May when Steel Partners' launched its tender offer.
In an annual white paper on the economy, the government sounded a cautionary note against takeover defences used to protect inefficient management or prevent restructuring of companies needed to raise productivity.