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Tokyo High Court Rejects Injunction Against Bull Dog

Earlier this afternoon, the Tokyo High Court handed down its ruling on the injuction that Steel Partners had saught against Bull Dog’s proposed ‘poison pill’ plan for diluting the hedge fund’s holdings in the sauce maker, and it ruled on the side of Bull Dog.

Reuters explains the logic behind the ruling:

The Tokyo District Court ruled that the issue of share warrants does not violate the principle of shareholder equality as long as the economic interest of shareholders is maintained.

Lawyers have said Japanese corporate law does not protect the size of a stake relative to other shareholders’ stakes, just its monetary value.

The logic there may seem fuzzy, but it should be kept in mind that judges in Japan rule on the letter of the law, and almost never inject their own interpretation.

Warren Lichtenstein, the manager of Steel Partners, had this to say:

We believe the company’s scheme, if allowed to be carried out, would be detrimental to the legal framework of corporate Japan. (It) would weaken international faith in the integrity of the Japanese capital markets, and would not only deter investment in Japanese companies but also undermine Japan’s efforts to become a global centre.

On the one hand, he could be very correct. On the other, if firms start to feel safe from the threat of hostile takeover, we may see a reversal in the trend of companies deciding not to go public with their shares due to fears of unsolicited takeover bids.

Steel Partners plans to appeal the ruling.

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