Proxy adviser backs Nintendo founder family office’s call for Toyo board reshuffle

By Makiko Yamazaki

TOKYO (Reuters) -Proxy adviser Institutional Shareholder Services Inc (ISS) has recommended that shareholders of Japan’s Toyo Construction vote for six of nine director candidates backed by the family office linked to Nintendo’s founder.

Yamauchi-No.10 Family Office (YFO), which now holds 28.51% of Toyo, is seeking to take the $687 million marine construction firm private and is calling for a reshuffle of the board that has resisted its buyout offer.

The takeover battle comes at a time when the Japanese government is putting together M&A guidelines to spur acquisitions by cracking down on unreasonable defence tactics against credible takeover offers.

YFO last year offered to pay 1,000 yen per share, higher than a 770 yen per share offer from an industry rival that Toyo had endorsed at the time. It took about nine months for the company to form a special committee to assess YFO’s proposal.

ISS said in a report that YFO’s bid was “sufficiently compelling and reasonably certain,” but the board’s response “fell far short of providing reassurance that it had shareholders’ best interest in mind”.

“Based on the above analysis, we believe that a majority presence of the dissident nominees on the board is warranted to restore shareholder confidence and introduce the necessary governance improvements,” ISS said.

ISS has recommended voting against six of 11 director candidates nominated by the company, saying that the presence of the remaining five nominees on the board would be needed to provide continuity.

YFO said in a statement to Reuters that the way the Toyo board had handled its proposal reflected the bad habits of Japanese companies that have hampered the country’s capital markets.

A separate filing on Tuesday showed YFO has increased its stake in Toyo to 28.51% from 27.19% previously, after its standstill agreement with the company expired in May.

Toyo released a statement criticising the move as evading Japan’s tender offer rules, which prohibit a bidder from purchasing shares during the tender offer period.

($1 = 139.4800 yen)

(Reporting by Makiko Yamazaki; Editing by Jacqueline Wong and Mark Potter)