Japan Kitchen Battle Ends With Rare Hostile Bid Victory
Japan Kitchen Battle Ends With Rare Hostile Bid Victory
(Bloomberg) -- In a hostile takeover bid that centered on the role of kitchens at a Japanese eatery, Colowide Co. has shown it can stand the heat.
Colowide confirmed Tuesday that it had succeeded in its unsolicited offer to take control of Ootoya Holdings, a well-known operator of restaurants that serves cheap, traditional Japanese food. Colowide, which runs multiple restaurant chains, wants to integrate Ootoya into its network of central kitchens — hubs that can serve multiple restaurants at once — a step Ootoya management and a group of employees rejected, saying it would be detrimental to its business.
Colowide’s stake in Ootoya will rise to about 47%, it said in a statement that confirmed an earlier report by the Nikkei. While below its target of a 51% stake, it should still give Colowide enough control of the company to install its own slate of directors at a shareholders meeting, having failed in a bid to do so earlier this year. It had been uncertain if Colowide would attract sufficient support from individual investors, many of whom hold Ootoya long-term in order to claim “yutai” shareholder gifts, including free meals and rice.
Colowide shares rose as much as 6.4% in Tokyo on Wednesday, the most in a month.
Once considered unacceptable in Japan, hostile takeover bids involving listed companies have become increasing common in the past few years, as shareholders increase pressure on management to improve performance. Earlier this year, Maeda Corp. completed a hostile takeover of road paving company Maeda Road Construction Co., a company with which it had ties going back more than 50 years. Trading house Itochu Corp. last year succeeded in its bid for Descente Ltd., swiftly replacing its management.
Descente shares are down almost 30% since the completion of that deal, despite Itochu — one of the five Japanese companies in which Warren Buffett recently took a stake — sending in its own directors. A similar fate may await Colowide and Ootoya, with the bid meeting with little approval from analysts given the impact of the coronavirus pandemic on the restaurant industry.
That Colowide “is willing to pay such a large premium to purchase an unwilling asset whose strategy clearly conflicts with their own and where their own strategy has a demonstrable track record of failure is a big red flag,” Mio Kato, an analyst at LightStream Research who publishes on Smartkarma, wrote in note Aug. 26.
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