New Japanese Laws Raise M&A Likelihood (NIKOY, TAKAF)

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Includes: NIKOY, TAKAF
by: John Bethel

I've posted a lot about Japan's changing corporate landscape. That changing landscape forms the backdrop to my positions in Nikko Cordial (OTC:NIKOY) and, most recently, Takefuji (OTC:TAKAF).

And that's why this post from The Stalwart caught my attention. It links an article from The Times of London with the headline, "Japan Braced for Invasion of Raiders."

Corporate Japan is preparing to face an onslaught of foreign takeovers amid the biggest shake-up of company law in 50 years. After years of receiving protection under law, top companies in a variety of sectors are set to become attractive targets for foreign buyers.

The further down the piece:

The new companies code takes effect from today and will start the clock on a set of dramatic changes that will open the door to a wave of takeovers. The most significant of these changes allows foreign buyers to buy a Japanese company using shares. Until now, takeovers of Japanese companies have been relatively rare because the buyer was previously forced to pay with cash.

And the article even mentions one of the portfolio's holdings:

In the finance sector, companies such as Takefuji could draw interest from HSBC, which, according to speculation, is seeking to establish a retail presence in the world’s second-biggest economy.

If memory serves, HSBC was looking at buying Takefuji a couple of years or so ago. Maybe HSBC just didn't feel the climate in Japan was right. Or, maybe (and this would be the biggest worry for Takefuji shareholders) Takefuji's founding family just didn't want to sell (assuming any sale would be for a fair price).

Of course, being such a cash-rich company, Takefuji could do a little buying of its own. Buying other companies or buying back its own stock. Or, as mentioned when it got bought, paying special dividends to us shareholders.

Cold, hard cash presents lots of possibilities.

[Disclosure: Author is currently long shares of NIKOY and TAKAF.]