Rare Japanese takeover rejected

An Oji-Hokuetsu merger could "globally compete" says Oji

Japan's Hokuetsu Paper Mills says it is to oppose a hostile takeover bid - rare for Japan - by larger rival Oji Paper.

Oji, Japan's largest paper maker, has said it will go ahead with a tender offer for sixth-ranked Hokuetsu in a deal that could exceed $1.4bn (£747m).

An Oji-Hokuetsu merger would create the world's fifth-largest paper maker.

It is unusual for Japanese firms to attempt hostile takeovers, with the traditional way of doing deals normally much more cautious and consensus-lead.

If the bid is successful it could set the tone for more hostile acquisitions.

Oji said its proposed "business integration" would bring an improvement in efficiency and allow the combined firm to "compete on a global level".

Poison pill

Hokuetsu is determined to stay independent and has rejected Oji's offer to buy 50% of the company.

However, its outright rejection of the proposal without consulting shareholders has annoyed some stock holders, a quarter of whom are foreigners.

At the same time Hokuetsu has launched a poison pill defence, involving the issue of new shares to dilute a hostile bidder's stake should it acquire a holding of more than a 20%.

Mitsubishi Corporation is also involved in the battle, having agreed to buy 30bn yen of new shares from Hokuetsu.

Such a move would give Japan's top trading house a quarter stake in terms of voting rights.