TOKYO (Reuters) - Alps Electric Co (6770.T) stock jumped 8 percent on Monday after the firm promised a share buyback of about 40 billion yen ($353 million) to win support for an acquisition - a pledge backed by Elliott Management, a stakeholder in both suitor and target.
The Japanese components maker offered the buyback along with a pledge to give shareholders 50 percent of group net profit for three business years beginning April, and 30 percent thereafter.
The promise comes days ahead of a Dec. 5 vote by shareholders of Alpine Electronics Inc 6816.T on whether to swap their stock for that of Alps in an all-share takeover deal. Alps already owns 40 percent of the vehicle electronics maker.
Oasis Management, Alpine’s second-largest shareholder with a 9.9 percent stake, has called on other shareholders to reject the deal, arguing the price offered for their shares was too low. The deal needs two-thirds of votes in favor to go through.
Earlier this month, Alpine said the deal would put its enterprise value – debt plus equity - at 7.7 times its earnings before interest, tax, depreciation and amortization (Ebitda). That would compare with 10.7 times at rival Clarion Co Ltd (6796.T), which was bought last month by France’s Faurecia SA (EPED.PA) in a $1.3 billion deal.
Oasis, a Hong Kong-based activist fund, said the offer represented 1.2 times Ebitda based on Alpine’s actual, not forecast, earnings.
Elliott is a $35 billion U.S. activist hedge fund best known for fighting Argentina over its debt restructuring. Separate filings it made on Oct. 10 showed it owns 9.78 percent of Alpine and 11.20 percent of Alps.
“We commend Alps’ management on this innovative shareholder-value-driven approach to increasing returns for all stakeholders in the merged Alps/Alpine business,” Elliott said in an emailed statement.
The 50 percent profit payout would compare with an average dividend payout ratio of 21 percent over the past five years, showed data from Refinitiv Eikon.
Alps said it did not discuss plans with Elliott ahead of Monday’s announcement.
“We communicate with Elliott in the same manner as with other shareholders,” a spokesman said.
Alpine said it appreciated one of its biggest shareholders was positive about the takeover deal.
Oasis, however, said its position was unchanged.
“A vote in favor of this merger is a vote in favor of abuse of minority shareholders and extremely poor corporate governance,” it said in a emailed statement.
Alps' shares closed up 4.6 percent, having risen as high as 7.8 percent after the firm announced the buyback, which it said will be completed by June. Alpine shares ended flat, whereas the benchmark Nikkei 225 share price index .N225 rose 0.8 percent.
Reporting by Junko Fujita; Editing by Jennifer Hughes and Christopher Cushing