Makiko Yamazaki and Ritsuko Shimizu
TOKYO (Reuters) – Unsolicited takeovers will become commonplace in Japan over time due to government efforts to eradicate the stigma of the practice, the CEO of Dai-ichi Life said after succeeding in clinching a $2 billion deal to acquire the company in a surprise bid.
The life insurance company submitted a bid to acquire Benefit One in December, despite the employee benefits provider having already agreed to a lower tender offer from digital health information company M3.
The move raised eyebrows in Japan, where unsolicited offers remain rare and life insurance companies are considered among the most conservative companies in the country’s conformist business culture.
“We decided to make the offer out of strategic necessity,” Chief Executive Tetsuya Kikuta told Reuters in an interview, saying the company needed to develop new business as demand for insurance stagnated due to Japan’s shrinking population.
“We were preparing for more negative comments about our move, but fortunately we heard a lot of positive comments from people in the capital markets.”
Although the offer was unsolicited, Dai-ichi Life did stipulate that it would proceed with its offer only if Benefit One and its parent company Pasona agreed to the terms, underscoring the still deep reluctance of Japanese companies to pursue hostile takeovers.
Reputational issues related to unsolicited offers had been discussed by Dai-ichi Life’s board, but new government takeover rules helped ease the decision, Kikuta said.
The Department of Economy, Trade and Industry last year published mergers and acquisitions guidelines aimed at combating overprotective tactics and encouraging takeovers, eliminating a long-standing stigma against unsolicited bids.
Bank executives also say they are no longer afraid to finance or advise a hostile buyer.
Asked whether Dai-ichi Life might file another unsolicited bid, Kikuta said he didn’t know but added: “I believe such deals will become more common over time.”
An increase in unsolicited offers will likely lead to higher transaction costs in Japan as buyers of target companies will have to be mindful of the possibility of counteroffers, he said.