Major optical glass producer Hoya Corp. plans to make a tender offer for shares in Pentax Corp., in spite of an earlier merger agreement between the two firms, because major Pentax shareholders were n…
Major optical glass producer Hoya Corp. plans to make a tender offer for shares in Pentax Corp., in spite of an earlier merger agreement between the two firms, because major Pentax shareholders were not satisfied with the proposed merger ratio. While this move will probably satisfy the Pentax stockholders because it effectively raises the amount that Hoya will pay for the camera maker, it is unclear if Pentax will agree to being taken over. Hoya intends to start the tender offer in late June 2007, aiming to acquire a majority stake by offering JPY 770 per share. The two firms had agreed in December 2006 to merge in October 2007. But according to a Hoya official, unexpected issues arose. One of these is opposition by Pentax“s shareholders. Sparx Group Co., the largest shareholder, holds a 23.9% stake, while Fidelity Investments, the second-largest shareholder, owns 12.6% of all outstanding shares. These shareholders are believed to have demanded that the merger proposal be reconsidered, unhappy with the share exchange proposal of one Pentax share for 0.158 Hoya share. These two major shareholders hold more than 35% of the shares combined, so it is likely that the merger proposal will be rejected at Pentax“s shareholders meeting scheduled for June. But if Hoya and Pentax change the merger ratio, then the market may lose confidence in the process in which the corporate value of the two firms was calculated when the merger plan was announced. So Hoya is set to raise the premium that it will pay by moving to a tender offer to take control of Pentax. Another factor is a disagreement that existed between Hoya and Pentax from when they were negotiating a merger. The two firms had difficulty coordinating over a sales contract for lens products that Pentax has with a third party. According to a Hoya official, while this contract remains in place, Hoya cannot fully enjoy the benefits of a merger. But if Hoya makes Pentax a subsidiary through a tender offer, then it will not be tied down by the contract. Pentax President Fumio Urano is expected to agree to the tender offer proposal, and the focus is now on how the firm“s board will decide.