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Business trends

Japan's takeover defenses rest on crumbling investor support

Proposals pass by narrow margins as shareholders question bosses' motives

Nagoya Castle: Investor support is dwindling for measures that wall off Japanese companies from takeover bids. (Photo by Takashi Uema)

TOKYO -- Investor support for safeguards against hostile takeovers is dwindling in Japan for companies that still employ such defenses, which critics say protect underperforming managers.

Just 55.2% of Sumitomo Realty & Development shareholders voted in favor of renewing the property group's defense measures at its annual general meeting on June 27, down from 66.3% in 2016, results published by the company on Wednesday show.

The company has sought to extend the measures every three years.

Similar proposals at other companies passed by even narrower margins. Chemical maker Adeka, which made a controversial tender offer for agrochemical supplier Nihon Nohyaku last year, barely managed to pass its safeguard resolution with 52.9% support.

Civil engineering group Maeda and printing press manufacturer Komori received approval from 53.7% and 54.4% of their shareholders, respectively.

Support was also tepid at bigger corporations. Film studio Toei and Sumitomo Metal Mining saw approval in the 60% range. At toy-maker Tomy, 62.2% voted in favor of keeping defenses that the company described as "for the benefit of enterprise value and the common interest of shareholders."

These kinds of safeguards became popular after a 2005 hostile takeover bid for Nippon Broadcasting System by internet company Livedoor, then run by brash young entrepreneur Takafumi Horie, frightened old-line Japanese companies.

But amid mounting criticism from foreign and domestic investors, the number of companies with takeover defenses has fallen about 40% from its peak.

This trend has been encouraged by Japan's Stewardship Code of 2014, which calls on institutional investors to keep a watchful eye on corporate management and earnings.

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