TOKYO (Reuters) -Tokyo Kikai Seisakusho Ltd on Friday won a major court victory in its quest to use a poison pill defence against its biggest shareholder - a closely watched ruling that could make certain kinds of hostile bids in Japan far more difficult.
The Tokyo District Court rejected a request for an interim injunction from Asia Development Capital (ADC), saying that the investment firm's share purchases could be seen as potentially coercive.
It also said that actions taken to exclude ADC from a vote by Tokyo Kikai shareholders on whether to adopt the poison pill were "not unreasonable", according to a copy of the ruling seen by Reuters.
Kazumasa Otsuka, a lawyer for ADC, said ADC plans to appeal to the Tokyo High Court on Monday.
Tokyo Kikai, Japan's biggest manufacturer of printing presses for newspapers, said in statement that the poison pill was legal and appropriate.
It is seeking to issue new shares that would dilute ADC's 40% stake - a holding that the investment firm rapidly built up in a matter of weeks. A stake of more than 33% in Japan gives the stakeholder veto rights over important board decisions and sometimes de facto control.
At an extraordinary general meeting last week where ADC was prevented from voting, Tokyo Kikai shareholders voted in favour of the poison pill.
Tokyo Kikai argues that ADC's stake threatens the rights of its minority shareholders, especially given that it quickly built its stake and has not presented the company or other shareholders with a new management plan.
ADC counters that it not being able to vote on the poison pill is contrary to the principle of shareholder equality enshrined in Japanese corporate law.
The battle highlights both a rise in hostile takeovers in Japan over the past few years as well as what experts have called failings in the country's takeover rules, noting they leave small cap firms particularly vulnerable to aggressive stake-building from unwelcome investors.
By comparison, in Europe tender offers are usually mandatory for acquisitions of stakes beyond a certain threshold - 30% in the UK - a rule that would prevent cases like Tokyo Kikai's. In the United States, the decision to issue a poison pill can be taken quickly by a company's board whereas Japanese companies feel they need shareholder approval.
Reporting by Makiko Yamazaki; Editing by Edwina Gibbs