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Nireco Co., Japan: Introduction of the Poison Pill    
 
Product Ref: 06/294C Company: Nireco Corporation

Product Type: Case Industry: Others

Related Product(s): Teaching Note
Authors: Mitsuru Misawa   
Japanese corporations faced the looming threat of hostile takeovers because of the rapid dissolution of cross-shareholdings that began in the 1990s, in particular, between creditor banks and corporate borrowers. As a result of this uncoupling, the share of stable shareholders, those in long-term business relationships with the corporation, fell by half over the past 10 years. On the other hand, foreign ownership of Japanese companies, which used to account for only a few percent of all outstanding shares, rose rapidly. Thus, the proportion of free-floating shares has risen significantly, implying that buying out a company by means of a takeover bid in Japan has become far easier now. Although Japanese corporations have traditionally believed that hostile takeover bids have little chance of success, Hidemaru Yamada, president of Nireco Corp.ˇXa high-tech measuring device manufacturerˇXfelt the need to introduce "poison pill" defences to counter possible hostile takeover bids from foreign investors. Nireco assessed the situation regarding the introduction of poison pills, taking into account Japanˇ¦s institutional infrastructure, its law and its economic conditions; in March 2005, it announced a "security plan" which included an issue of subscription warrants to existing shareholders in the event of an unfriendly takeover bid.
Functional Area : Accounting & Control
Economics & Business Policy
Finance & Investments
Social Enterprises & Ethics
Strategy & General Management

Issues: Corporate Governance, Court Decisions, Defense Tactics, Hostile Takeover, Investment Banking, Japanese Law, M&A, Nireco, Poison Pill, Share Warrants, Takeover Bid, Tokyo Stock Exchange
Length: Text: 12 pages
Exhibits: 14 pages
Country: Japan

Pub. Year: 2006 Level of Difficulty: 3
         
This product type is available in the following language(s):      English   Simplified Chinese
         
Related Information: Students will learn about the critical thinking that top management needs to display to make decisions on takeover or anti-takeover activities, as well as the types of pressure imposed by various stakeholders - the board of directors, shareholders and banks. Students will identify the major reasons firms introduce a poison pill defence and the factors that managers should consider when using it. Students will also identify other defensive tactics used to counter takeover bids.
 
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