Take That! Japan Inc

This one is going to be interesting. In the last year or so, it's looked liked the old guard Japanese management forces are winning the war against activist hedgies and others who believe that companies are owned and should be managed for the benefit of shareholders. But in a shot across the bow of NEC, Perry Capital shows that this war is far from over. As reported in NikkeiNet:

Perry Capital Offers To Buy 25% Stake In NEC Electronics From Parent

NEW YORK (Nikkei)--U.S. investment fund Perry Capital LLC told NEC Corp. (6701) that it was willing to buy an additional 25% stake in NEC Electronics Corp. (6723) as part of its drive to make the semiconductor manufacturer more independent from the parent, The Nikkei learned Tuesday.

Perry Capital, which is already NEC Electronics' third-largest shareholder with a 4.5% stake, has argued that NEC's ownership of more than 50% of NEC Electronics, a publicly traded company, is causing the subsidiary's stock price to slump. Perry Capital is demanding that NEC reduce its stake from the current 70% to less than 50%.

The U.S. shareholder offered to buy 30.87 million shares of NEC Electronics for 154 billion yen, or 5,000 yen apiece, a 65% premium over NEC Electronics' average share price over the past three months. But it is unlikely that NEC will accept the offer, with President Kaoru Yano saying Tuesday that the company did not plan to change its stake in the subsidiary.

NEC Electronics posted a second straight loss in fiscal 2006 as it expanded system chip operations in line with NEC's management policy. Perry Capital believes that NEC Electronics' corporate value will increase if its business independence is established.

With Perry Capital offering a hefty premium, NEC will have to come up with a countermeasure to raise NEC Electronics' corporate value to justify its decision to shareholders.

Rejecting a 65% premium bid for NEC Electronics shares will take some serious explaining to NEC shareholders. It would be foolish to underestimate the power of the old guard and their overwhelming desire not to change - but this one will be interesting nonetheless.