Makino’s graphite processing machine. Captured from Makino’s website.
The Japanese government has moved to block South Korean private equity firm MBK Partners’ planned acquisition of a Japanese machine tool manufacturer.
According to the Nikkei on Wednesday, the Japanese government issued a recommendation to halt MBK Partners’ plan to acquire Makino Milling Machine, based on the Foreign Exchange and Foreign Trade Act.
“This measure marks the first such case since the 2017 amendment to the Foreign Exchange and Foreign Trade Act, which strengthened investment regulations on Japanese companies,” the Nikkei reported. “The government appears to have determined that there are security concerns because machine tools can also be diverted to weapons manufacturing.” Some analysts link the decision to the Takaichi government’s policy of lifting restrictions on lethal weapons exports and fostering the domestic defense industry.
Even before the Foreign Exchange Act was amended, the Japanese government ordered a halt in 2008 when a British investment fund sought to acquire additional shares in power company J-Power under the same law.
Machine tools fall under an industry that includes dual-use technology — goods applicable for both military and civilian purposes — and are designated as a core sector under the Foreign Exchange and Foreign Trade Act. Foreign investors must undergo prior government review when acquiring shares in such companies.
A company that receives a recommendation to halt an acquisition plan must decide whether to accept it within 10 days. If the recommendation is rejected, the Japanese government can issue a formal halt order.
Makino faced a hostile takeover attempt from Japanese motor maker Nidec in April last year. MBK Partners then stepped in and announced in June that it would make Makino a wholly owned subsidiary through a tender offer (TOB).
“If MBK Partners’ tender offer is withdrawn due to this halt recommendation, Makino will need to reorganize its corporate value enhancement strategy as a listed company once again,” the Nikkei said. “Even if it chooses independent growth, its management strategy will need to be reviewed.”