Effissimo’s tender offer, and the rise of a dominant shareholder (2021)

What the choice of neutrality would later ask

The heart of this episode is that a tender offer made without the company’s endorsement succeeded on the strength of the target’s decision to stay neutral. With a premium on the offer price and the bidder disclaiming any intention to involve itself in management, declaring for or against might well have narrowed shareholders’ options — and a certain caution can be read in Sanken Electric’s choice. But neutrality is neither a defence nor a welcome, and it also meant giving up, of its own accord, any means of controlling how far a major shareholder’s stake would swell. Whether to take the “pure investment” explanation at face value was a question the company handed to its shareholders.

The buying that followed the offer, and the rewriting of the stated purpose of holding, left open how long a pure investment stays purely an investment. When an involvement that began at roughly 10% reaches close to 30%, and reaches the stage of contemplating advice on management and material proposals, the relationship between company and large shareholder carries a tension that the logic of capital alone cannot measure. How much freedom of action management preserved by meeting an activist’s tender offer with neutrality is a question likely to be asked again as Sanken Electric’s governance develops.