Bull-Dog wins court case vs Steel Partners

TOKYO (Reuters) - Japan's Bull-Dog Sauce has won a court case to erect anti-takeover defenses aimed at thwarting a $260 million bid by U.S. hedge fund Steel Partners, according to a court document obtained by Reuters on Thursday.

The defense plan, commonly known as a poison pill, allows the sauce maker to issue share warrants to dilute the hedge fund's stake and make a takeover more difficult.

Steel Partners said will appeal the ruling at the Tokyo High Court because it believes the poison pill to be discriminatory.

"We believe the company's scheme, if allowed to be carried out, would be detrimental to the legal framework of corporate Japan," said Warren Lichtenstein, manager of Steel Partners in a statement.

"(It) would weaken international faith in the integrity of the Japanese capital markets, and would not only deter investment in Japanese companies but also undermine Japan's efforts to become a global centre."

The Tokyo District Court ruled that the issue of share warrants does not violate the principle of shareholder equality as long as the economic interest of shareholders is maintained.

Lawyers have said Japanese corporate law does not protect the size of a stake relative to other shareholders' stakes, just its monetary value.

The Tokyo District Court added the issue of warrants would also need approval from two thirds of the company's shareholders.

On June 24, more than 80 percent of Bull-Dog Sauce's shareholders approved the firm's plan to issue warrants on July 11, diluting Steel Partners' stake to under 3 percent from about 10 percent.

TAKEOVER FIGHT

The management of Bull-Dog has remained staunchly opposed to Steel Partners' advances even after the fund sweetened its offer to 1,700 yen per share on June 15. The offer expires on August 10.

The battle with Bull-Dog underscores the fund's struggle to win acceptance in Japan where shareholder activism is still relatively rare.

Steel Partners' unsolicited tender offer for Bull-Dog is just one of several fights the activist fund is waging in Japan. It has over $4 billion invested in over 30 Japanese firms.

A couple of years ago poison pills were virtually unheard of in the world's second-largest economy, but now more than 300 Japanese firms have announced defense schemes amid a growing threat of hostile takeover.

Investors are concerned that the pressure created by the threat of a hostile takeover will dissipate and shareholder returns will continue to lag the rest of the world.

"I fear, as do many other observers, that once companies are protected in this way, they will have less of an incentive to focus on the needs and interests of shareholders," said Marc Goldstein, representative director of proxy advisory firm ISS Japan.

"(They may) revert to their former patterns of behavior, in which the interests of lenders and business partners often took priority."

(Additional reporting by Aiko Wakao)