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Nintendo Founding Family’s Investment Firm Withdraws Tender Offer for Toyo Construction

Yamauchi No. 10 Family Office Ends Bid for Marine Engineering Firm After Disagreements Over Growth Strategy and Valuation
Japan
t 1890.TSE Mid and Small Cap 2000
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The investment firm managing the wealth of Nintendo’s founding family, Yamauchi No. 10 Family Office (YFO), has officially withdrawn its tender offer to acquire Toyo Construction. This decision marks the end of a prolonged one-and-a-half-year struggle, which concluded without securing Toyo’s agreement.

YFO’s move follows Toyo Construction’s rejection of the offer last week, citing concerns over inadequate measures for improving corporate value and an offer price deemed too low. The offered price of 1,255 yen ($8.73) per share was considered insufficient, particularly as it fell below the stock’s value around early December.

YFO had faced challenges in raising the offer price and deemed future agreement with Toyo unlikely. The situation was further complicated as YFO-backed directors had secured a majority on Toyo’s board during the general shareholders meeting in June, yet the two entities remained divided on Toyo’s growth strategy and valuation.

Toyo Construction’s previous management had developed a five-year plan focusing on marine civil engineering, both domestically and internationally. Key initiatives included a venture with Mitsui O.S.K. Lines for offshore wind power construction and a significant investment in building a ship for offshore wind power cable installation. Despite Toyo’s conviction in expanding its offshore wind power and overseas construction business, YFO viewed some aspects of this strategy, particularly the overseas expansion, as overly optimistic.

The contention also extended to Toyo’s share valuation. The surge in Toyo’s share prices post-June shareholders meeting pushed YFO to increase its initial offer of 1,000 yen per share to 1,255 yen. However, Toyo argued that the potential growth of the offshore wind power sector warranted a higher value than what YFO proposed.

Toyo’s shares experienced fluctuations, reaching a high of 1,372 yen in November, but subsequently declined following the company’s opposition to the tender offer. On Wednesday, the shares closed at 1,207 yen.

This withdrawal comes after a previous tender offer by Infroneer Holdings at 770 yen per share, which was later countered by YFO’s May 2022 offer. The ensuing tension saw YFO opposing the reappointment of Toyo’s president in January, questioning the company’s commitment to considering their offer seriously.

As of now, YFO has not made a decision regarding its nearly 30% stake in Toyo. Infroneer Holdings, through its subsidiary Maeda, holds about 20% of Toyo’s shares. The withdrawal of the tender offer signifies a pivotal moment in the relationship between YFO and Toyo Construction, reflecting the complexities of corporate acquisitions and growth strategies in today’s dynamic business environment.

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