Japan will likely see record number of takeover offers by foreign firms

TOKYO - Japan will likely see a record number of attempts by foreign companies to buy domestic firms in 2025, spurred by changes in government policy and a weak yen. 

Foreign firms made 157 proposals to buy or acquire majority stakes in Japanese companies as at the end of August, according to data compiled by Bloomberg. That’s on pace to exceed the 2024 record of 193. 

Driving the trend are government guidelines from two years ago, which instructed companies to give “sincere consideration” to takeover offers and not reject them simply because they are unwelcome to the existing executives.

With the yen trading about 11 per cent less than its five-year average, targets are also cheaper for overseas buyers. 

In the past, “if the target company’s management said no, that was often the end of it”, said Dr Shigeru Matsumoto, a professor at Kyoto University’s Graduate School of Management. With the guidelines, “it’s no longer easy to just turn bidders away at the gate”.

Notable acquisitions or proposals this year include Bain Capital’s 510 billion yen (S$4.4 billion) purchase of Mitsubishi Tanabe Pharma and Blackstone’s offer in August to buy IT services provider TechnoPro Holdings for 490 billion yen.

Not every attempt by a foreign firm to acquire a Japanese company succeeds. Canada’s Alimentation Couche-Tard abandoned its US$46 billion (S$59 billion) bid to buy 7-Eleven owner Seven & i Holdings in July after a nearly yearlong campaign.

Under pressure from investors, Japanese firms have also been abandoning takeover defenses. The number of Japanese companies with such measures dropped to 251 as of June 2024 – half the peak in 2008, according to Daiwa Institute of Research. 

The trend to scrap such defences is especially strong among large-cap companies. As at September 2024, less than 2 per cent of companies with market capitalisations above one trillion yen still had such measures, and less than 4 per cent of companies in the 300 billion to one trillion yen range.   

The trend is following the US. About 60 per cent of companies on the S&P 500 index employed “poison pill” defences two decades ago, but by 2022, that number had dropped to just six firms, according to a survey by law firm Nagashima Ohno & Tsunematsu,

Japan’s Foreign Exchange and Foreign Trade Act, which regulates foreign investment and acquisitions for national security reasons, has only been used once to block an acquisition. In 2008, the government stopped a British investment fund from increasing its stake in Electric Power Development (J-Power).

Taiwan-based electronic component maker Yageo passed the regulatory hurdle to go ahead with its offer to buy Shibaura Electronics, a major temperature sensor maker designated a “core industry” for national security purposes. Yageo outbid Japan’s Minebea Mitsumi, which had made a counter-offer as a self-declared white knight.

“Given the current exchange rate and the large number of listed companies in Japan, there are still a lot of bargains to be found,” said Dr Ulrike Schaede, a professor at the University of California, San Diego, who specializes in Japanese companies. “But more importantly, 20 years of corporate governance reforms have left Japanese companies without any defences – they are naked, and have no guns.” BLOOMBERG