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Toshiba Machine's takeover defense backed by US proxy adviser

Institutional Shareholder Services sides against Murakami-linked fund

Toshiba Machine aims to win approval for a take-over defense measure at a shareholders meeting on March 27.

TOKYO -- U.S. proxy advisory firm Institutional Shareholder Services is endorsing Toshiba Machine's defense measure against a hostile takeover bid, Nikkei has learned, a move that will likely influence voting decisions by the industrial tool maker's institutional stockholders.

Toshiba Machine is seeking shareholder approval for its "poison pill" measure to beat back an unsolicited takeover offer by City Index Eleventh, a fund backed by activist investor Yoshiaki Murakami. 

The defensive move would dilute City Index's holdings by issuing stock warrants to other shareholders. Toshiba Machine will ask at a March 27 shareholders meeting for the green light to adopt this tactic.

Institutional investors typically are not fans of such takeover-defense measures from the perspective of corporate governance. But ISS apparently opposes the capped tender offer of up to 44% proposed by the fund.

Meanwhile, City Index has extended its tender offer until April 16 now that Toshiba Machine set the shareholders meeting date. The fund kept the offer price at 3,456 yen a share. The stock closed at 2,437 yen on Thursday, down 189 yen, or 7.2%.

City Index points out that shareholders can tender their shares after the end of March in order to remain eligible for dividends. The Japanese tool maker plans to pay a year-end dividend of 42.5 yen per share.

Tokyo-based Office Support, which owns 66.5% of City Index, is Toshiba Machine's top shareholder, with a roughly 13% stake. The fund has urged the producer of injection-molding equipment to improve capital efficiency by steps such as increasing return on equity. The company has rejected such calls, saying those measures would hurt shareholder value.

Murakami is a former bureaucrat who rose to prominence as an activist investor before an insider trading conviction in 2007.

The battle comes after Toshiba Machine scrapped its anti-takeover mechanisms last year. The former subsidiary of industrial group Toshiba Corp. is set to rename itself Shibaura Machine next month.

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