08-05-2025
Japan's tycoon families seek buyouts to evade investor pressure
Akio Toyoda's $42 billion (¥6 trillion) plan to buy out Toyota Industries is the most dramatic example of a growing trend in Japan of founding families trying to take companies private.
The Ito family, which owns 8% of Seven & I Holdings, tried unsuccessfully to engineer a management buyout to thwart a takeover offer of the retailer. The founding family of software developer Fuji Soft also made a failed attempt to buy out the firm in conjunction with Bain Capital.
Taisho Pharmaceutical Holdings was bought by the Uehara family last year in a deal that valued the firm below its book value, drawing criticism from activist investors that the buyout price was set too low for the benefit of the Ueharas. Outdoor gear maker Snow Peak's founding family took the firm private in 2024 to push through an expansion strategy.
The desire to delist stems from mounting pressure public companies face from investors and the threat of being acquired. A government guideline introduced in 2023 has made it difficult for listed companies to flatly reject any serious takeover proposals. Additionally, the Tokyo Stock Exchange has pushed firms to focus more on shareholders' demands, emboldening activist investors.
"The cost of being listed has risen,' said Hidenori Yoshikawa, an analyst at Daiwa Institute of Research. "They have to deal with activist investors and the risk of unsolicited takeovers.'
The impetus to go private extends beyond founding families. The number of management buyouts in Japan jumped almost 50% to 37 last year, according to data compiled by Bloomberg. The pace hasn't changed so far this year, with 10 such deals already announced through mid-April.
The deals are valued at about $4.5 billion, according to data compiled by Bloomberg, and look set to jump to a record level if Akio Toyoda goes ahead with the planned buyout of Toyota Industries.
Fears of being acquired are rising among Japanese companies after Canada's Alimentation Couche-Tard made an unsolicited, but what it calls a friendly, takeover bid to Seven & I.
"People look at Seven & I Holdings and thought even if you are a ¥5 trillion company, you can become a takeover target,' said Tetsuro Ii, chief executive of Commons Asset Management.
The owner of the country's ubiquitous 7-Eleven convenience stores was built into a global empire by Masatoshi Ito. Despite the Ito family having the largest stake in the company, its involvement in the firm has dwindled.
"In the grand scheme of things, the logic of the equity market will filter through. I think executives know that the best. They know they can't control a firm when they only have a small stake, like say 5%,' said Yoshiki Nagata, CIO of enTorch Capital Partners.
In many cases, pressure from investors, or just the mere fear of it, works as a catalyst for MBOs. In March, Topcon got a management buyout offer, which valued the optical equipment maker at about ¥358 billion. The deal came on the heels of calls from U.S. activist investor ValueAct Capital for the company to sell some operations or go private. The number of firms listed in the three main sections of the Tokyo Stock Exchange has declined by 0.4% so far this year as delisting outnumbered new listings.
"When companies see activists buying one of their competitors, they often become worried that they could become target, themselves,' said Takahiro Nakazawa, the director of Mizuho Trust & Banking's stock transfer agency department.
Delisting, including MBOs, is a major exit strategy for activists, too, as buyers often pay a hefty premium to purchase stakes held by minority shareholders. Investors often welcome the exit from the market of companies perceived as not paying enough attention to shareholders' interest. They have long complained that the Tokyo Stock Exchange is putting quantity over quality, allowing too many lackluster companies to be listed.
