Bully Steals Candy From Baby

So American carpetbagger, Steel Partners, has managed to extract tribute from another Japanese management, in the form of Nissin Foods (TSE Code#2897) offer to purchase Myojo's (TSE Code#2900) shares from any and all comers at a heft premium to an already ramped-up market share price. Steel will undoubtedly tender. Nissin trumpeted the transaction benefits of a rather nebulous-sounding tie-up (surely meaning creation of a noodle cartel or price fixing oligopoly). But in their statement, they also unashamedly described their actions as protecting the many and varied Myojo constituents such as suppliers, customers, employees and management.

Not content to "cut & run" with the profits, nor satisfied with the greenmail gains, Steel reported today a 6% stake in Nissin itself, apparently as a result of the sub-optimal move of buying shares at a premium, but not taking the company over.

Greenmail IS effective in Japan. However, the Japanese will not continue to be extorted forever. What they (they being Japan Inc.) should do is let Steel actually succeed in one or so of their tenders since Steel has no strategic business rationale as cash acquirer, not to mention a probable shortfall in capital to actually finance the tender(s). It is a classic case of "be careful what you wish for". Let them, in the process of shaking down management, actually gorge themselves on a couple of chunky (but hard to digest) morsels (already ramped with expensive valuations) and see how they enjoy rolling up their sleeves as sole owner, or whether or not they have a trade buyer lined-up in the event of success. For the best way to deal with a bully is to call him out and embarass him (or her) in front of their peers for all to see their hollowness.

Could Japan stomach a few corporate sacrifices? Perhaps they should countenance such an offering to Steel, and then let labor and government ministries go wild and harass them thereafter as a not-so-subtle message to copycats to think carefully. For if they let Steel achieve even a modicum of success shaking down the system, there will be no shortage of imitators shaking up the share registers of listed companies something that would certainly NOT be in the interests of management, nor many other constituents, or even longer-term affiliated investors where shorter-term profit maximization is not at the top of the list of ownership objectives.