February 27, 2020 / 10:19 AM / a month ago

UPDATE 1-Japan's Maeda Road to discuss cross-shareholdings with a rival amid hostile bid

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By Junko Fujita

TOKYO, Feb 27 (Reuters) - Japanese road builder Maeda Road Construction, a target of a rare hostile bid by its largest shareholder, will start talks with a rival, Nippo Ltd , about holding stakes in each other, the targeted firm said on Thursday.

Maeda Road is trying to thwart the bid from Maeda Corp , which is aiming to increase its stake in Maeda Road to 51% from 24.68%, but Maeda Road President Ryozo Imaeda said the potential alliance with Nippo was not aimed at thwarting Maeda Corp’s bid.

Executives of the both companies told a media briefing they could boost their corporate value by holding a stake of about 5% in each other.

“By forming a capital alliance we can expect synergies,” said Imaeda. “We can reduce redundancies of our operation hubs and share human resources to fend off labor shortage problems.”

But an abrupt announcement of the potential alliance between Japan’s top road builders could buck a years-long trend of companies unwinding the web of cross-shareholdings that traditionally bound Japanese industrial groups.

Maeda Road has been working on measures to counter the bid from Maeda Corp. This month it announced a special dividend payout of about $500 million as a defense strategy to reduce its attractiveness.

Maeda Corp said separately on Thursday it could withdraw its bid as the dividend payouts would reduce Maeda Road’s assets beyond a level Maeda Corp set before launching the bid last month.

Maeda Corp also extended its tender offer period to March 12 from March 4. Maeda Corp is offering 3,950 yen a share. Maeda Road shares closed at 3,300 yen on Thursday. (Reporting by Junko Fujita; Editing by Clarence Fernandez)

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