Daiwa House Industry has announced a tender offer for Sumitomo Densetsu shares at ¥9,760 ($65) apiece, seeking to acquire the electrical contractor in a transaction valued at approximately ¥169.5 billion ($1.1 billion). The homebuilder aims to secure all outstanding shares except those held by current parent Sumitomo Electric Industries, which controls a 50.66% stake.
The transaction employs an unusual structure designed to maximize returns for minority shareholders while providing tax benefits to the parent company. Sumitomo Electric has agreed not to participate in the public tender offer, instead planning to sell its entire stake back to the target company at ¥6,877 per share following a share consolidation. This arrangement, according to Daiwa House, allows the parent to utilize dividend-received deductions under Japanese tax law, enabling a higher tender price for public shareholders.
Daiwa House set a minimum threshold of 3.88 million shares for the offer to proceed, representing approximately 11% of outstanding stock. The builder cited strengthening its construction capabilities, particularly for data centers and semiconductor facilities, as key motivations. The company has been seeking to secure specialized contractors as Japan faces labor shortages in construction, with regulations limiting working hours implemented in 2024.
The 30-business-day tender period runs through December 15. If successful, Daiwa House intends to implement a share consolidation to squeeze out remaining minority holders, ultimately delisting Sumitomo Densetsu from the Tokyo Stock Exchange. The company’s shares closed at ¥7,620 on October 29, making the offer price a 28% premium.
The three parties have also entered into a business partnership agreement aimed at maintaining existing relationships between Sumitomo Densetsu and Sumitomo Electric, particularly in the power utility sector, while exploring new opportunities in renewable energy projects.
