Defending self-reliance against Oji Paper’s hostile tender offer (2006)

What self-reliance left behind

What Hokuetsu’s defence reflected was a shape of the firm that cannot be settled by the logic of capital alone. Against Oji, which argued the effects of integration in figures, Hokuetsu chose an independence supported by its region, its customers and the pride of its shopfloor — a choice that drew the criticism of being “Japanese and irrational.” Yet the spirit of trying to protect a business built by the sweat of one’s brow is hard to call peculiar to Japan. What does a company defend when it faces a takeover? This defence can be seen as illuminating that question from outside the capital market.

On the other hand, the cost of independence was not small. Mitsubishi Corporation, brought in to block acquisition of a majority in the market, remained Hokuetsu’s largest shareholder for a long time afterwards, and a capital structure in which the top executive came from the trading house continued from this share allotment onward. The takeover defence measures, and the device of a third-party allotment below market price, left issues on which judgement is still divided today in relation to the interests of existing shareholders. Being swallowed by the industry leader was avoided — but the question of whose sake independence was protected for appears to have been handed on to the dialogue with shareholders more than a decade later.