There is no shortage of conflicting theories on a tangled, three-sided corporate acquisition drama that Japan's financial press and rumor mill have been following blow-by-blow since the middle of August.
By some accounts, it is a ruse to secure capital gains. By others, it is mostly a creation of the newspapers. And by still others, it is fast developing into Japan's first American-style takeover battle.
But almost everyone agrees it would not have happened this way several years ago and probably portends some fundamental, if slow-to-develop, changes in the rules by which Japanese companies are bought and sold.
In Japan, takeovers are comparatively rare and occur only if both sides approve. In most cases, one is on the ropes financially or two healthy companies agree that advantages would come through economy of scale or the union of complementary operations under one roof.
The affair began unfolding one month ago, with a report in the prestigious Japan Economic Journal that Minebea Co., a fast-growing leader in production of precision ball bearings, with sales of about $550 million in the year ended last Sept. 30, had quietly acquired a 19 percent interest in Sankyo Seiki Manufacturing Co.
Sankyo is another medium-sized precision electronics firm, with a product line including components, digital clocks, machine tools and 8mm movie cameras. It has a tie-in with IBM in robots. Sales in the year ended April 1984 came to about $350 million.
Minebea quickly acknowledged its stake in Sankyo and said that it was opening talks for a merger. Sankyo responded publicly that it was not interested. By normal Japanese practice, that would have been the end of it. But Minebea President Takami Takahashi has continued to press his suit, in the media and in private. Sankyo reportedly began lining up support among its shareholders and threatened to cut off business ties with Minebea.
"Old-fashioned people don't agree with my ways," said Takahashi, dismissing criticism his tactics have aroused.
In the midst of their fray, a third player appeared, Trafalgar Holdings Ltd., a Los Angeles-based investment company. It is headed by Charles Knapp, former chairman of Financial Corp. of America, who resigned last year under pressure from federal regulators.
Trafalgar said it had acquired an option for 23 percent of the outstanding shares of Minebea and was interested in obtaining more or buying the company outright. In addition, Trafalgar said, it might buy into Sankyo and merge the two Japanese companies.
Takahashi says that Minebea was approached through an intermediary with an offer to sell that option back at a price equivalent to about double what Minebea shares were trading for. He suggested Trafalgar's real intent was capital gains, not takeover. (Early speculation in the market, however, had Minebea and Trafalgar in cahoots to drive up Minebea's share prices.)
Trafalgar Executive Vice President Don Reynolds denies Trafalgar made any such offer and says his company's goal is a long-term stake in an attractive corner of the Japanese electronics industry. "We have every desire to do this on a friendly basis," he said in a telephone interview from Los Angeles. " . . . But we're not precluded from doing -- I don't like the word hostile -- an offer to all the shareholders."
In the back seat of his chauffeured Nissan President sedan, Takahashi spent much of a recent hour-long ride from home to office making radio telephone calls that he described as efforts to line up support for his bid for Sankyo.
In an interview, Takahashi denied he will press a hostile takeover. But at the same time he says he will use rights accorded by Minebea's existing stake in Sankyo (Minebea is now the largest single shareholder) to open a major investigation of its books.
Some Japanese security analysts believe that he is blowing smoke and really intends to continue talking in hopes Sankyo will agree -- the usual Japanese pattern. Sankyo itself is declining comment, saying whatever happens next is entirely in Minebea's hands.
Takahashi is building up defenses against Trafalgar, meanwhile. In a meeting this week, his board of directors approved a private offering of about $65 million in new convertible bonds in an attempt to dilute Trafalgar's option and make it harder to buy a controlling interest.
All in all, the events are bizarre for Japan and are being called the possible start of its first takeover fight. (Some security analysts, however, say that distinction goes to an unsuccessful bid by Bendix Corp. in the 1970s to take over a Japanese brake company.)
U.S. takeover battles are viewed here as proof that Americans have shortsighted scorn for stability, good employe relations and profit through productivity rather than speculation. All are attributes Japanese companies consider the core of good business practice.
Loyalty, as much as financial gain, binds shareholders, management and employes here. Some companies, in fact, have new hires sign loyalty oaths. Thus, it was no surprise when Sankyo's company labor union backed up management with a statement that it opposed Minebea's merger idea.
Shareholders trust management to know best, even if things are going poorly. Annual meetings are so tranquil that a special class of extortionists, known as sokaiya, or "meeting people," has appeared. They buy a few shares and rudely ask embarrassing questions at meetings -- unless management has broken the law and given them a payoff in advance to keep quiet.
"Shareholders are entitled to a decent return," said James Abegglen, former president of the Japanese affiliate of the Boston Consulting Group. "But they don't have unlimited rights, which is really the western notion."
Another barrier to hostile takeovers is that a comparatively small portion of a typical Japanese company's shares are actively traded. Others are in the hands of "stable shareholders" who are looking for long-term earnings, not quick profit. "Major shareholders do not release their holdings very easily," said Yoshihisa Tabuchi, executive vice president of Nomura Securities Co.
Cross-shareholdings help bind together the Japanese industrial groupings known as keiretsu, such as the clusters of companies and banks bearing the Sumitomo and Mitsubishi names. Any group member targeted for a takeover could count on the support of fellow companies.
Such takeovers are, in theory, fully permissible under Japanese law. But the same law tends to favor the status quo. Lawyers say a besieged management group or union could throw up roadblocks in court that would delay it for up to two years.
Trafalgar's status as a foreign company further confuses things. Though there is nothing illegal about what it is proposing, powerful bureaucrats in the Ministry of Finance could well decide to raise obstacles of their own if they feel it is trying to impose "foreign ways" in Japan.
Takahashi predicts the government will protect him. But Trafalgar's Reynolds says he has confidence the two target companies are not big enough for the Japanese government to protect at the risk of provoking another trade dispute with the United States.
Despite their distaste for American ways in this field, some executives here feel that as their country opens its financial and investment markets to the outside world, old taboos against mergers will begin to fade.
Most formal legal restrictions against foreign ownership of Japanese firms have been dropped in recent years. And more business leaders believe that mergers can confer advantages in remaining internationally competitive, securities specialists say.
Rather than starting a new product line from scratch, the normal Japanese practice, it can make more sense to buy a company already making a successful one. Still, no one expects adoption of American-style takeover practices. As Nomura's Tabuchi said, "Any such trend should be in line with the public interest."