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Bull-Dog uses `poison pill' against hostile takeover

"The other issue is the problem of dilution."

Toshihiko Matsuno, analyst at SMBC Friend Securities

Bull-Dog Sauce Co yesterday exercised Japan's first "poison pill" takeover defense to dilute the stake of a hostile bidder as it tries to fend off the advances of US fund Steel Partners.

Bull-Dog began the procedure to issue three equity warrants for each Bull-Dog share to existing shareholders in the aim of reducing the US investment fund's stake to 2.86 percent from 10.52 percent.

Steel Partners will be refused the right to exchange its equity warrants into new shares in the condiment maker, which will instead spend ?2.3 billion (18.9 million dollars) to buy back the warrants from the US fund.

"We are carrying out our plan orderly," a Bull-Dog spokesman said.

The move came a day after Steel Partners took its battle for control of the condiment maker to Japan's top court in an increasingly acrimonious battle seen as a test case on the legality of poison pill-style defense schemes.

Tokyo High Court Judge Satoru Fujimura on Monday described Steel Partners as an "abusive acquirer" in the latest slap in the face to the fund and its head Warren Lichtenstein, who has said he wants to "educate" Japanese managers.

Bull-Dog shares plunged by the daily loss limit of ?100 for a second consecutive day to trade at ?725 yesterday, down 12.12 percent from the previous close. Steel Partners is offering ?1,700 per share.

"Prospects diminished that the share price will rise as a takeover war escalates and shareholders sold because they were disappointed," said Toshihiko Matsuno, a senior analyst at SMBC Friend Securities.

"The other issue is the problem of dilution. The value of the company itself will not change but the value of one share will fall to one-quarter" of its previous value, he said.

Some experts believe that Steel Partners may revise its strategy in Japan, or even pull out altogether, unless it wins its appeal at the Supreme Court.

The fund has already suffered defeats in several previous buyout bids and the share prices of a range of companies in which the fund has invested have declined in the wake of Monday's high court ruling.

"With this case Steel Partners' standing has weakened and so I'm sure it will consider" possibly exiting Japan, Matsuno said.

Dozens of Japanese companies have been putting in place poison pill schemes they could exercise in the event of a hostile foreign takeover bid, which are still rare in Japan and seen as a ruthless, Western-style form of capitalism.
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