NTT Docomo Buyout Brings Japan Inc. Consolidation Back in Focus

(Bloomberg) — Talk of what could be this year’s biggest deal and the largest tender offer in Japanese corporate history is reviving speculation that consolidation will increase for Japan Inc.

Shares of subsidiaries at Nippon Telegraph & Telephone Corp. such as NTT Data Corp. and XNET Corp. gained Tuesday after the Nikkei reported that NTT plans to buy out its mobile phone carrier unit NTT Docomo Inc. through a tender offer.

“This is a significant message to the Japanese market,” said Naoki Fujiwara, the chief fund manager at Shinkin Asset Management Co. “These are two very notable parent-subsidiary companies that everyone knows about.”

graphical user interface, chart: Buyout report spurs gains in NTT Data, XNET

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Buyout report spurs gains in NTT Data, XNET

News of the deal comes as some of Japan’s “parent-child listings,” in which both the parent and its unit are listed entities, have taken steps to consolidate or divest amid criticism that the practice ignores minority shareholders’ interests. In May, Sony Corp. took its finance unit private for about 400 billion yen ($3.8 billion), while trading firm Itochu Corp. bought out the convenience store chain FamilyMart Co.


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Consolidation is “inevitable” for companies to thrive, wrote SMBC Nikko Securities Inc. strategists including Masashi Akutsu in a note. Factors including structural supply limits and intensifying competition with foreign firms have driven the push toward consolidation, they wrote.

The NTT Docomo tender offer could be “a turning point” for Japanese equities should the number of parent-subsidiary companies reorganizing their structures pick up in the near future, Fujiwara said.

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