Japan's Shimachu backs Nitori's US$2b takeover bid

[TOKYO] Japanese home improvement retailer Shimachu on Friday said it will accept a US$2 billion buyout bid from furniture chain Nitori Holdings, rejecting an earlier agreed offer from peer DCM Holdings.

The turnabout reflects a changing investment culture in Japan, where unsolicited, hostile takeover offers were once considered a corporate taboo. Nitori is the latest company to propose a takeover without prior agreement of the target's management, something almost unheard of up to recent times.

The rise of such deals comes as the government pushes for better corporate governance, putting management under pressure to improve shareholder returns, especially during buyouts.

Nitori on Friday said there was no change in its offer price of 5,500 yen (S$70.67) per share to buy all of Shimachu, valuing the deal at 214 billion yen. DCM, which owns DIY stores nationwide, had bid 4,200 yen in an offer expiring on Monday.

Shimachu said it would withdraw its endorsement of DCM's bid and Nitori said it would launch its tender offer on Nov 16.

Nitori initially flagged a possible bid to buy Shimachu on the day an investment group backed by prominent activist investor Yoshiaki Murakami revealed it owned 8.38 per cent of Shimachu and considered DCM's offer cheap.

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Another prominent example of the shift in Japan's acquisition trend was a hostile bid by travel agent HIS to buy hotel operator Unizo Holdings last year.

Though the HIS bid failed, it prompted foreign investment groups to make competing bids, boosting Unizo's share price.

Buying Shimachu would give greater scale to Nitori - known for selling items as varied as sofas and kitchen tools at affordable prices - as retailers continue to seek growth even as the Covid-19 pandemic slows consumption.

Shimachu's share price ended Friday trade up 0.4 per cent ahead of the announcement at 5,510 yen, just short of Nitori's offer price. Nitori gained 1.5 per cent while DCM added 2.2 per cent.

REUTERS