Tokyo exchange's landlord gets backing for 'poison pill' bid defence

TOKYO: Shareholders in the landlord of the Tokyo Stock Exchange (TSE) approved a "poison pill" defence against hostile investors on Tuesday, after an April run-up in the property company's shares fuelled speculation of a possible bid.

Heiwa Real Estate Co had asked its investors to back renewing the defensive measure to protect itself from potentially "abusive" investors for the next three years, while it works to redevelop an area of office buildings around the exchange.

The move, approved at Heiwa's annual meeting, runs counter to a national decline in such defensive moves as Prime Minister Shinzo Abe's administration pushes for better corporate governance and treatment of shareholders.

In this month's spate of annual meetings, 63 Japanese companies sought approval to renew poison pills, down by about half from last year, according to Daiwa Institute of Research.

The TSE asks companies to justify any defensive measures because they could impact the rights of shareholders and have the potential to be abused to serve the interests of management.

A spokesman for the Tokyo-based property developer defended the poison pill, saying: "If an abusive investor becomes our shareholder, we might not be able to complete the project."

A TSE spokesman declined to comment on Heiwa's defense measures. The exchange reviews all poison pill proposals but doesn't have veto rights. The TSE's operator, Japan Exchange Group Inc., doesn't have a poison pill arrangement.

Like many poison pills, Heiwa's includes a provision to issue warrants - rights that can be converted into shares - which would dilute the stake of an investor that acquired a certain stake in the company. It also lets the company set up an "independence committee" of internal and outside members to review the appropriateness of any bids.

Of the 3,625 TSE-listed companies, 396 have warrant-type poison pills, down from a peak of 461 in 2008, according to the exchange. For the same period in the United States, the number plunged to 270 from 1,206, according to FactSet Research Systems.

"Shareholders welcome a takeover bid above anything because the bid translates to a premium over the current market price of 30 percent or more," said Stephen Givens, a lawyer specialising in corporate governance.

But Hidenori Yoshikawa, senior consultant at the Daiwa institute, said: "Poison pills can make good sense because they force an abusive investor to explain why it needs to own a large stake, and companies can question if the investor is serious about managing the company."

Heiwa's poison pill passed despite a relatively high 37 percent of its shares being held by foreign institutions.

The stock surged 19 percent during two weeks in April amid rumours of a takeover by a foreign fund, and increased further when the company announced a share buyback.

Heiwa said it had not been approached by any potential bidders, and the stock has given up almost all of its April gains. It now trades at barely half the company's net asset value, reckons Nomura Securities Co analyst Daisuke Fukushima.