Brother Industries has declined to increase its offer for Roland DG Corporation, citing: "...actions (that) are inconsistent with the spirit of the Guidelines for Corporate Takeovers published by the Ministry of Economy, Trade and Industry and seriously undermine confidence in Japan's capital markets, both domestically and internationally."
The announcement that Brother Industries will not increase its offer for Roland DG, effectively stymies any further progress in its offer. In an announcement to the Tokyo stock exchange, Brother says: "In response, the Offeror hereby announces as of the date hereof that, taking into consideration the circumstances of discussions and negotiations with the board of directors and special committee of the Target Company, and various other factors, the Offeror has decided to not increase the Tender Offer Price for the Tender Offer from 5,200 yen.
As described in the March 13 2024 Press Release, from around December 2019, the Offeror had been in discussions with the Target Company with respect to measures to enhance the corporate value of both companies, including by collaboration and joint development. Subsequently, as the Offeror implemented initiatives such as joint product development with the Target Company, it was convinced that the Offeror would be the best partner to enhance the corporate value of the Target Company over the medium- to long-term, and submitted a Letter of Intent dated September 1, 2023 to the Target Company. In addition, since the publication of the March 13 2024 Press Release, the Offeror has conducted negotiations and discussions with the board of directors and special committee of the Target Company sincerely and in good faith.
However, the Target Company, despite having received the Letter of Intent, in addition to having pursued a management buyout (MBO) without inviting the Offeror into the bidding process or due diligence process, has, after the publication of the March 23 2024 Press Release, continued to request that the Offeror provide overly detailed explanations and more specific and quantified proposals, on the pretext of its concerns about the possibility of dis-synergies occurring. As it is clear from this background, the responses and procedures of the Target Company have been consistently conducted from the outset with the substantive purpose of preventing the Offeror from acquiring management control of the Target Company, and it must be said that such actions are inconsistent with the spirit of the Guidelines for Corporate Takeovers published by the Ministry of Economy, Trade and Industry and seriously undermine confidence in Japan's capital markets, both domestically and internationally.
Violations of confidentiality?
In addition, certain officers and employees of the Target Company have, for such purposes and in violation of their confidentiality obligations to the Offeror, repeatedly provided explanations, based on misconceptions or through lack of specific evidence, that could mislead Target Company stakeholders or damage the business credibility of the Offeror in the course of the aforementioned discussions and negotiations and in interviews with select media organizations. The Offeror regards such actions by the Target Company as seriously lacking in integrity for a listed company which plays an important role in the Japanese market, and will consider taking a firm stance against the Target Company's insincere conduct.
In light of the Target Company's opinion as described in the"Notice Concerning Change of Opinion Pertaining to the Tender Offer for the Company's Common Shares by XYZ K.K." published by the Target Company dated April 26, 2024, the Offeror considers there to be a gap in logic in the argument for dis-synergies occurring as assumed by the Target Company, and that the probability of such dis-synergies occurring is low. Given that other companies the Offeror has made wholly owned subsidiaries in the past have also achieved steady growth with the cooperation of its suppliers, the Offeror believes that even at the present time, provided it can elicit a friendly and constructive attitude from the Target Company, it would be the best partner to enhance the corporate value of the Target Company over the medium- to long-term.
"Factual errors or lacking in evidence..."?
However, taking into consideration the circumstances of discussions and negotiations with the board of directors and special committee of the Target Company, press coverage and various other factors, in particular, the management of the Target Company having repeatedly made assertions based on factual errors or lacking in evidence, the Offeror has decided as of the date hereof, with great regret and disappointment, to not increase the Tender Offer Price for the Tender Offer from 5,200 yen, based on its judgement that the establishment of a relationship of trust with the management ofthe Target Company cannot be expected, which would be indispensable to the maximum enhancement of the corporate value of the Target Company. In the case that in the future the Conditions Precedent to the Tender Offer are fulfilled, the Tender Offer will commence as originally planned.
As stated in the Brother Group Vision, "At your side 2030", the Offeror will continue to strive to maximize its corporate value through leaping forward in the industrial field and transformation of the printing field, in order to achieve sustainable growth while responding to the rapidly changing environment. The Offeror will continue to put its customers first in every situation and contribute to the development of society and the future of the earth with an "At your side" spirit. "
The opinions expressed in this statement from Brother Industries are theirs alone and not those of wide format online.
Footnote: Roland DG shares have dropped from a high of 5,600 Yen on May 7 to 5,340 Yen by May 17th, on news of Brother Industries' declining to increase its offer.
