Absorbing Alpine by share exchange — and the ratio fight with Oasis (2018)

A parent-child listing reduced to a single number

The heart of this affair was never whether to merge, but who sets the price of the merger and how. The industrial logic of binding electronic components to software carried a reasonable amount of conviction as a piece of CASE-era restructuring. But under a parent-child listing, where the parent designs the ratio while holding some 40% of the votes, a minority shareholder has thin grounds for believing that the number 0.68 is fair. The company answered with a recalculation by a third party and a special dividend; that approval outside the parent’s own stake came to only a little over 30% shows the remedy did not fully win trust.

The courts ultimately upheld the company’s ratio and the dispute was settled. Even so, not being found improper in law is not the same as minority shareholders being satisfied that the terms were fair. In a Japanese market where parent-child listings continue to be unwound, the question of what procedure legitimates the ratio of a merger involving a controlling shareholder — the independence of the special committee, the role of outside directors — appears to remain as this case’s unfinished business. The activist’s objection was dismissed; the issue it raised was not.