Japan’s Iwatani ends Cosmo’s battle with activist group by purchasing $710 million stake

By Kantaro Komiya, Makiko Yamazaki and Yuka Obayashi

TOKYO (Reuters) -Japanese gas company Iwatani Corp has agreed to buy a stake of about 20% in Cosmo Energy Holdings from a group of activist investors, though it was not clear if the country’s third-biggest oil refiner had found itself a white knight.

The deal marks an end to Cosmo’s high-profile battle with a group led by prominent activist shareholder Yoshiaki Murakami, which had flagged its intention to raise its stake from 20% to nearly 25%.

Iwatani, which currently owns 0.07% of Cosmo, said on Friday it will pay 105.3 billion yen ($710 million) or 6,052 yen per share to raise its stake to 19.93% and will buy an additional 0.29% subject to regulatory approval, according to an exchange disclosure.

“This was a very successful exit by Murakami-san and is perhaps the best he could have hoped for,” said analyst Travis Lundy of Quiddity Advisors, who publishes on Smartkarma.

“But the lack of statement by Cosmo regarding Iwatani’s stake purchase and its plan to go over 20% indicates the possibility this purchase was neither sought, nor planned, and may not be officially welcome,” he said.

Ownership of more than 20% in a Japanese company can often give the stakeholder de facto veto rights over certain decisions where approval is required by more than two-thirds of shareholders.

The purchase price represents an 8% premium to Friday’s 5,616 yen closing price, which an Iwatani spokesperson said factored in expected synergies from the partnership between the two firms.

Iwatani, which works with Cosmo in hydrogen-related projects and other areas, said it decided to buy Cosmo shares as it believes a deeper partnership would enhance both companies.

A Cosmo spokesperson said the company was not involved in talks between Iwatani and the activist investor group over the sale of the latter’s stake.

Shares of Cosmo have surged 61% this year, far outpacing a 26% gain in Japan’s TOPIX index.

Cosmo had called for a shareholder vote on Dec. 14 to seek approval for a revised “poison pill” strategy to block additional share purchases by the Murakami-led group.

Cosmo Chief Executive Shigeru Yamada told Reuters last month that the company could struggle to win shareholder support for a takeover defence, which certain investors flatly oppose.

But influential proxy adviser Institutional Shareholder Services this week had recommended that shareholders vote for the poison pill.

In a statement issued after Iwatani’s Friday announcement, Murakami-linked fund City Index Eleventh said it had dropped its plan to buy more Cosmo shares.

“We hope Iwatani’s ownership would accelerate Cosmo’s efforts to further increase shareholder value,” it said.

Cosmo said in a separate statement that it had received a letter from the Murakami-linked group about its intentions and would consider how to proceed.

($1 = 148.1400 yen)

(Reporting by Kantaro Komiya, Makiko Yamazaki and Yuka Obayashi; Editing by Edmund Klamann, Susan Fenton and Edwina Gibbs)