While an aggressive young upstart fills them with terror, Japan?s old-guard managers hope that a miracle drug will soon soothe their frazzled nerves. The medicine they seek is the poison pill: a takeover defence developed in America in the 1980s, after hostile corporate acquisitions took off there

With infamous cross-shareholdings among firms unravelling and return-seeking investors gaining influence, there has long been talk that a similar, if smaller, takeover trend may start in Japan. Since last year, some civil servants have been preparing for this by trying to clarify rules of the corporate-control game. This low-level debate has grabbed national spotlight, however, thanks to Takafumi Horie, the 32-year-old head of Livedoor, an Internet company. Horie has boldly challenged a broadcasting industry run by slow and sleepy men twice his age.

Since last month, Horie, a university dropout, has captivated Japan by taking on ? with dreams of taking over ? a big and badly run broadcaster, Fuji TV. By gobbling up shares in after-hours trading, Horie was able quickly to bypass reporting rules and amass a big stake in Fuji TV?s subsidiary, Nippon Broadcasting System (NBS), acquiring more than half of the voting rights.

Horie has grown his firm ? once called Livin on the Edge ? mostly through mergers. The financing of the current bid has been especially controversial. Lehman Brothers gave Livedoor the money in exchange for death spiral convertible bonds, which give Lehman the right to convert the bonds into shares at a constant discount to the share price.

This, in effect, would reduce the value of Livedoor shares ? indeed, Livedoor?s shareholders may already be suffering from that. There has been talk that, because of its Livedoor role, Lehman will struggle to find new clients in Japan (though if Horie triumphs, such talk will surely end).

<I>Source: Times of India</I>