Interview with Kaneko Masashi, Chairman, Nikko Cordial Group.

(From Journal of Japanese Trade & Industry (JJTI))

Byline: Interviewer: Doge Ichiro

Japan is entering an "age of high-profile M&A deals," with mergers and acquisitions involving Japanese companies reaching an all-time high in the first six months of this year. In the meantime, many analysts point out that Japanese financial authorities lag behind in establishing adequate M&A rules as exemplified by disarray over Internet service provider livedoor's attempted takeover bid of Nippon Broadcasting System. Nikko Cordial Group Chairman Kaneko Masashi, who also chairs a committee on ways to adequately use capital markets at the Japan Association of Corporate Directors, discusses the problems of Japan's M&A system.

"Cat-and-Mouse Game" Between Law & Reality High-profile M&A dramas, including hostile takeover bids just like those seen in the United States some time ago, are now taking place in Japan.

Kaneko: Such a trend can basically be regarded as good because the appearance of corporate bidders and defenders leads to revitalization of the securities market. The main concern is that adequate rules and laws concerning M&As have yet to be established in Japan, with most of them being settled in court. Some judges are not well versed in the current corporate activities, and I wonder if it is advisable for such judges to make the final decisions. The current law does not assume that such a large number of M&As and hostile takeover bids occur. Meanwhile, corporate society is rapidly making strides, resulting in a "cat-and-mouse" game between law and reality. Rules and laws should be amended in a flexible manner to generate understanding among market participants.

The high-profile takeover bid between livedoor and Fuji Television Network for Nippon Broadcasting System invited public criticism mainly because livedoor acquired a massive amount of NBS shares at a stroke during off-hours trading.

Kaneko: Off-hours trading is a system intended for use by institutional investors. It should not be used for M&As. The absence of legal provisions does not mean that market participants can do anything they want. Employing such a tactic shows a lack of corporate morality. A securities firm with a sense of ethics had told livedoor that it is "difficult" to employ off-hours trading. Corporate managers should attach importance to both laws and a sense of ethics in their activities. The securities market would otherwise be thrown into confusion.