Elliott Questions Japan Firm Unizo’s Actions in Bidding War

(Bloomberg) -- Elliott Management Corp., the largest shareholder in Unizo Holdings Co., is questioning the actions of the Japanese real-estate group’s management in handling a bidding war that began in July.

The activist investor, which has built a 13% stake in Unizo, demanded answers in a letter to the company’s board that it released to media Wednesday. The letter queries the decisions that Unizo has made in responding to competing offers for the firm. A spokeswoman for Unizo said the company hasn’t decided on how to respond.

“We are highly concerned about the lack of disclosure and the risk of conflicts of interest that have appeared in Unizo’s handling to date of the tender offer bids,” Elliott wrote.

The Tokyo-based developer was little-known even within Japan until HIS Co. launched an unsuccessful hostile bid in July. It received a competing offer from SoftBank Group Corp.’s Fortress Investment Group in August, which the company initially supported before withdrawing its backing last month, saying it wanted Fortress to increase its offer to 5,000 yen ($46.62) a share from 4,000 yen. That came as it said that received another rival bid from “one of the largest investment funds in the world,” reportedly Blackstone Group Inc., for 5,000 yen a share.

Unizo’s shares have surged almost 130% since HIS announced its offer on July 10, and closed trading at 4,560 yen on Wednesday, above the Fortress’s offer for the company. Travis Lundy, a special-situations analyst who publishes on Smartkarma, has said “there is a strong likelihood that this ends with no successful bid.” Fortress’s tender offer expires Oct. 17.

Elliott’s intervention is the latest twist in rare bidding battle that could be another landmark for the Japanese market as it seeks to become more shareholder-friendly.

The investor asked for a detailed explanation of the “Employee Share Ownership Management Company,” which the company proposed to Fortress should be involved in an agreement on a deal. This entity, made up of employees, would have a stake in Unizo after the buyout and could exert control over decisions such as buying and selling properties and nominating directors, according to Unizo.

Such a structure may be intended to let existing management retain control over the company through an arrangement resembling a management buyout. Elliott also questioned why the basic policy on acquisitions hadn’t been determined or disclosed to investors when Unizo expressed its opinion on tender offer bids in August.

©2019 Bloomberg L.P.

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