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Oji Paper Launches Takeover Bid for Hokuetsu Paper Mills

Aug. 2, 2006 (AP) - Oji Paper Co., Japan's largest paper producer, began a hostile takeover bid today for rival Hokuetsu Paper Mills Ltd. in a deal that would reportedly create the world's No. 5 paper maker.

The tender offer bid comes a week after Hokuetsu rejected a first merger proposal from Oji and said it would instead go ahead with an previously planned tie-up with trading company Mitsubishi Corp.

Oji said in a release issued late Tuesday (Aug. 1) that it would spend at least 80.66 billion yen to take a controlling 61 percent stake in Hokuetsu. If Hokuetsu seals its partnership with Mitsubishi, Oji said it will pursue the takeover with an offer of 800 yen a share. But if the tie-up is scrapped, Oji said it would pay 860 yen a share.

Both prices offer a premium over Hokuetsu's closing price of 784 yen on Tuesday.

The higher bid offer of 860 yen would value Hokuetsu at around 141 billion yen.

Hokuetsu, based in northern Niigata prefecture and employing 2,822 people, said it plans to issue new shares to Mitsubishi Corp. to earn funds for capital investment and expansion. Mitsubishi has said it plans to invest 30.35 billion yen in Hokuetsu to help it bolster an existing plant in Niigata.

The investment would make Mitsubishi the top shareholder with a 24.44 percent stake, up from 0.97 percent.

Oji said its offer makes better sense because it would combine Hokuetsu's efficient business operations with Oji's bigger corporate scale, being able to better mobilize large-scale investments and compete internationally.

A Hokuetsu spokesperson told Dow Jones newswires the company would examine Oji's new offer before deciding how to proceed. Hokuetsu plans to hold an executive board meeting later

SOURCE: AP Newswire




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