Japan Issues M&A Guidelines to Protect Minority Shareholders

(Bloomberg) -- Japan’s government has released new guidelines on mergers and acquisitions to better protect minority shareholders in management buyouts.

Under the non-binding guidelines, companies that are the target of such takeovers should set up committees of independent directors to ensure minority interests are protected, the Ministry of Economy, Trade and Industry said Friday.

The revision, the first since the government set original guidelines in 2007, follows concerns that conflicts of interest may arise when management or majority owners buy out companies. Management has a fiduciary duty to shareholders but also an incentive to pay the lowest price for acquisitions.

The issue of fairness is in focus as Japanese conglomerates increasingly look to reshuffle their sprawling businesses by buying out listed subsidiaries. It’s also part of Prime Minister Shinzo Abe’s drive to make companies more responsive to shareholders, with the aim of luring investors at home and overseas.

Last year, hedge fund Oasis Management Co. tried unsuccessfully to block Alps Electric Co.’s takeover of its Alpine Electronics Inc. affiliate. Oasis, an Alpine shareholder, had said the deal was being done at a “shockingly low” price.

To contact the reporters on this story: Taiga Uranaka in Tokyo at turanaka@bloomberg.net;Takako Taniguchi in Tokyo at ttaniguchi4@bloomberg.net

To contact the editors responsible for this story: Marcus Wright at mwright115@bloomberg.net, Russell Ward, Katrina Nicholas

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