Tokyo District Court blocks Toho Holdings' takeover defense

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The Tokyo District Court on the 18th blocked the activation of a takeover defense measure that drug wholesaler Toho Holdings had introduced against an activist shareholder, Toho Holdings announced the same day. The injunction had been sought by 3D Investment Partners, a Singapore-based hedge fund that is Toho Holdings' largest shareholder, and the court's ruling bars the issuance of stock acquisition rights under the takeover defense, which would have been triggered if 3D raised its stake above 24 percent. Toho Holdings' defense worked by allocating stock acquisition rights free of charge to increase the share count of shareholders other than 3D, thereby diluting the fund's stake, and it met the conditions for activation after winning 54.7 percent approval at the company's regular shareholders' meeting in June. 3D aims to raise its stake to 27 percent, and Toho Holdings had argued that even a 27 percent holding would let the fund wield strong influence over management as an overwhelming top shareholder and force the company into measures that prioritize short-term gains. The case centered on whether a company can apply a poison pill that dilutes a target shareholder's holding even when that activist investor is not seeking to take control, and as activist activity heats up in Japan, the bar for introducing or activating similar defenses could rise. Toho Holdings said it will file an objection to the injunction.

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