Key developments in M&A law and regulation In recent years, actions against listed companies in Japan led by so-called shareholder activists have significantly increased; so much so that, in 2021, several important court decisions were issued regarding the validity of poison pills. In 2022, when a poison pill, which seemed permissible under previous court decisions, was invoked against a takeover technique known as a “wolfpack”, its operation was deemed unlawful by the court. In this particular case, a public company called Mitsuboshi introduced a poison pill and allocated stock option rights to all shareholders to respond to in-market bids by an activist, Adage Capital (AC), and several shareholders that Mitsuboshi determined were substantially working together with AC in purchasing Mitsuboshi’s shares. In response, AC filed an injunction asking the court to enjoin the allocation of stock options. In light of the 2021 case law on poison pills, it was widely expected that, in principle, if the shareholders were given the opportunity to approve or disapprove the introduction of poison pills and their invocation (ie, the allotment of stock option rights) at a shareholders’ meeting, the courts would likely deny the grant of any injunction. However, in the case of Mitsuboshi, the court granted the injunction against the allotment of the stock option rights, stating there was a lack of “reasonableness” in the invocation of the poison pill notwithstanding that Mitsuboshi’s shareholders approved the introduction andinvocation of such measures at a shareholders’ meeting.
As for the root causes of the recent emergence of inappropriate “wolfpacks”… Read more
