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Taisho Pharmaceutical to Go Private in Japan’s Largest Management Buyout

Taisho Pharmaceutical Holdings set for delisting after a successful tender offer by Otemon, marking a major shift in the company's ownership structure
Japan
t 4581.TSE Mid and Small Cap 2000
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Taisho Pharmaceutical Holdings is poised for delisting following a successful tender offer led by Otemon, a Tokyo-based company owned by a member of Taisho’s founding family. This move represents a pivotal shift in the pharmaceutical giant’s trajectory.

Otemon, under the leadership of Shigeru Uehara, has garnered significant control over Taisho by acquiring more than 60.03 million shares, surpassing the minimum requirement and securing a 73% stake. The strategic acquisition entails Otemon gaining full ownership of Taisho, with plans to purchase the remaining shares. This deal, amounting to approximately 710 billion yen ($4.87 billion), is distinguished as Japan’s largest management buyout.

Known for its prominence in the over-the-counter medication market and products like the Lipovitan energy drink line, Taisho’s exit from the public market is scheduled post a shareholder meeting in March. Despite the buyout announcement, the company’s shares have consistently traded above the offer price of 8,620 yen, drawing attention to its valuation dynamics. The price-to-book (P/B) ratio of Taisho dipped to around 0.5 immediately after the announcement and remains below 1, even at the offer price.

This valuation has spurred discussions, particularly with investment advisory firm Japan Catalyst highlighting concerns for minority shareholders. The firm criticized the buyout’s pricing strategy, arguing that it undermines the interests of these shareholders. The Tokyo Stock Exchange has been advising companies with P/B ratios under 1, generally perceived as a marker of low valuation, to enhance their capital costs.

The leadership transition will see Shigeru Uehara, currently serving as executive vice president, ascend to the CEO role, succeeding Akira Uehara, who has been at the helm for about four decades. This change comes at a time when Taisho is facing challenges with sluggish sales in its mainstay over-the-counter drug segment, adding another layer to the company’s evolving narrative in the pharmaceutical industry.

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