NEC moves to prevent hostile takeovers

[PC-GUY]

NEC plans to propose changes to its corporate charter, including raising the number of shares it can issue, in an effort to fend off potential takeover attempts, the company said Friday.
A series of takeover battles in Japan's rigid banking and media sectors, including one between Fuji Television Network and Internet portal Livedoor, has made it urgent for managers to consider ways to protect their companies from becoming targets of hostile bids.

The planned proposals at its annual shareholders' meeting in late June would include more than doubling the upper limit of the number of shares the company can issue to 7.5 billion from 3.2 billion, said NEC, the third-largest electronics conglomerate in Japan.

The higher issuance ceiling would make it more difficult for a potential suitor to secure a controlling stake.

The Tokyo-based company also plans to propose the reduction of the upper limit of the number of directors to 20 from 40 to cut the risk of its board being dominated by executives sent from a hostile buyer.

NEC, whose products range from mobile phones to supercomputers, currently has about 1.93 billion shares outstanding and 15 directors.

An NEC representative said the company would consider further steps after the government compiles guidelines for defending against corporate takeover attempts as early as this month.

NEC's move follows an announcement by Panasonic products maker Matsu****a Electric last week that it plans to adopt a "poison pill" provision to thwart potential takeover attempts.

A poison pill defense typically grants shareholders the right to buy more shares at a lower price in the event of a hostile bid, making a takeover attempt more expensive and time-consuming. Shares in NEC were up 0.86 percent at 585 yen in afternoon trade, underperforming the Tokyo stock market's electric machinery index, which rose 1.85 percent.


ZDNET