Approach from Murakami family would up the stakes in a pivotal corporate governance battle

Japan's most famous family of shareholder activists has threatened to hit a leading Toshiba subsidiary with a hostile takeover bid later this week, upping the stakes in a pivotal corporate governance battle.

Shares in Toshiba Machine surged by 19 per cent on Monday after the producer of industrial robots became the latest listed Japanese company to become embroiled in a situation that appeared to pit management against the interests of investors.

Within 24 hours, Toshiba Machine is expected to receive an unsolicited bid from a group of funds run by family members of Yoshiaki Murakami, according to people familiar with the matter. Mr Murakami is a prolific and aggressive shareholder activist whose tactics are celebrated by some as a long overdue shake-up of corporate Japan. However, others have decried them as a form of "greenmail", or purchasing enough shares in a company to threaten a takeover and then forcing the owners to buy them back at a premium.

Hostile bids remain rare in Japan, but several emerged in 2019 in industries as diverse as real estate and stationery as dozens of companies were pressured by investors to abandon "poison pill" takeover defenses and shareholder activism evolved into a more confident and potent force.

A broader shift in Japan has been marked by large conglomerates such as Toshiba, Panasonic, Hitachi and Fujitsu coming under pressure to buy in or sell off their listed subsidiaries. These are often companies where the parent holds a substantial stake and can push the subsidiary into decisions running counter to the interest of minority shareholders.

As part of its portfolio of cross shareholdings - themselves a heavily criticised aspect of Japanese corporate structure Toshiba Machine holds a 15.7 stake in NuFlare Technology, a listed Toshiba group subsidiary in which Toshiba Corp holds 52.3 per cent.

Last Thursday, Toshiba Machine said it would sell its stake in NuFlare to Toshiba, despite the fact that optical products maker Hoya in December made an offer considerably higher than Toshiba's.

Aya Nomura, Mr Murakami's daughter and a central figure in the family investment strategy, said that for the past 18 months she and her father had been attempting to convince Toshiba Machine to boost shareholder value and to deploy its stake in NuFlare and its cash in a way that maximises the benefit to investors.

"What Toshiba Machine is doing is like a time-slip to 30 years ago and to before the introduction of the corporate governance code," said Ms Nomura.

The Murakami's three funds have quietly built up a stake of 11.49 per cent in Toshiba Machine. The company on Friday demanded to know why and how the funds had done so "without prior consultation".

Ms Nomura responded that her funds have met with Toshiba Machine five times and sent 13 letters and emails.

Toshiba Machine also requested a 60-day period for the board to study the potential takeover bid, indicating that it may enact emergency anti-takeover measures such as the issuance of new shares if the Murakami funds went ahead with the offer.

The company only last year abandoned its poison pill measures, but defended its latest move as "necessary to give enough time and material for shareholders to make their judgment on the Murakami family's bid.

"There are concerns that this tender offer and its outcome could hurt the maximization of our corporate value and the interests of our shareholders," Toshiba Machine said.

It pointed to previous investments where it claimed Mr Murakami and his funds purchased enough shares in listed companies to threaten a takeover and then forced the owners to buy them back at a premium.

City Index Eleventh Co., backed by veteran activist investor Yoshiaki Murakami, said it will offer 3,456 per Toshiba Machine share to buy 43.82 percent of the molding machine company, spending 25.9 billion.

Question: According to the article, Mr. Yoshiyaki Murakami has secretly bought 11.49% of the shares. Assume that his tender offer for 3,456 per Toshiba Machine shares (to buy 43.82% of the shares for 25.9 billion) reflects a 19% premium over the price he paid on his initial stake. Assume also that the tender price reflects the true value of the company under Mr. Murakami. What would be Mr. Murakami's financial gains from the takeover deal if it went through?