## Facts

- An investment fund, through a wholly owned acquisition vehicle, acquired about 10.25% of a listed Japanese company and launched a tender offer to acquire all outstanding shares, raising its offer price during the bid.
- The company’s board questioned the bidder about its plans and concluded the responses were insufficiently specific and that the bid could harm corporate value.
- The board proposed a takeover defense using stock acquisition rights: all shareholders would receive multiple rights per share allowing purchase of new shares at a nominal price.
- The plan excluded the bidder and its affiliates from exercising the rights and authorized the company to acquire the bidder’s rights for cash at a fixed amount per right.
- The plan would substantially dilute the bidder’s stake while providing the bidder cash compensation for the acquired rights.
- A shareholders’ meeting approved the plan by a large supermajority (83.4% of voting rights of shareholders in attendance).
- The bidder sought provisional injunctive relief, arguing the scheme unlawfully discriminated against it and violated the statutory principle of shareholder equality.
- Lower courts denied relief; the Supreme Court affirmed, allowing implementation.

## Issues

1. Whether a takeover defense that discriminates against a particular shareholder by restricting exercise of stock acquisition rights violates the statutory principle of shareholder equality.
2. What standards govern judicial review of discriminatory takeover defenses, including how to distinguish protection of corporate value and common shareholder interests from management self-protection.
3. Whether, on these facts, the shareholder-approved rights plan was a reasonable and permissible response to the bidder’s tender offer.

## Decision

- The Supreme Court affirmed the denial of provisional injunctive relief and permitted the rights plan to proceed.
- Discriminatory treatment of a specific shareholder in a takeover defense does not necessarily violate shareholder equality when justified by the measure’s purpose and effects and aligned with shareholders’ common interests.
- The Court gave substantial weight to the fact that the defense was adopted by shareholder resolution rather than unilaterally imposed by management.
- On the record, the plan’s structure and the shareholder vote supported the conclusion that the measure was not unreasonable or excessive and did not breach shareholder equality.

## Legal Principles

- Shareholder equality generally requires equal treatment of shareholders in the same class proportionate to their shares, but the principle is not absolute.
- When a corporate measure differentiates among shareholders, legality turns on whether the differentiation is reasonable in light of the measure’s purpose and effects and whether it serves corporate value and the common interests of shareholders.
- A discriminatory takeover defense is more likely to be upheld when the shareholders, through a valid resolution, clearly approve the measure; shareholder decision-making functions as a key constraint on improper use of defensive measures.
- Defensive measures adopted primarily for incumbent management’s self-preservation, without a legitimate relationship to corporate value or common shareholder interests, are generally impermissible.
- In assessing reasonableness, courts may consider the plan’s economic impact, including dilution mechanics and whether the targeted shareholder receives compensation that mitigates inequity.

## Conclusion

The court held that a shareholder-approved takeover defense using discriminatory stock acquisition rights can be consistent with shareholder equality when, considering its purpose, effects, and adoption process, it reasonably protects corporate value and the common interests of shareholders rather than serving managerial self-protection.


Steel Partners Japan Strategic Fund (Offshore), L.P. v. Bull-Dog Sauce Co., 61 Minshū 2215 (Sup. Ct. Japan 2007)