Japan firms start to question poison pills

By Junko Fujita and Alison Tudor

TOKYO, May 8 (Reuters) - Cosmetics giant Shiseido (4911.T: Quote, Profile, Research) and Internet access provider eAccess (9427.T: Quote, Profile, Research) are among a handful of Japanese companies that have recently scrapped "poison pill" takeover defence schemes, bucking a trend that has helped shape Japan's reputation for being inhospitable to foreign capital.

Roughly 500 Japanese companies have introduced poison pill schemes since 2005, giving them the option to issue stock warrants to dilute the stake of a fund or company launching a hostile takeover.

The perceived threat of takeovers has heightened significantly in the past few years due to high-profile cases of foreign funds launching bids for Japanese companies and global consolidation in sectors such as steel.

Investors have generally frowned on poison pills because they tend to shield managers of poorly performing companies from the pressures of the stock market and in a broader sense have helped sour investors on corporate Japan.

"With these measures, companies have little pressure to improve management. They also have little incentive to boost their book value if they know they won't be bought," said Jun Nishizaki, chief portfolio manager at Nissay Asset Management.

But some companies have given investors hope by going against the trend.

Nomura Securities said in a report this week that 12 Japanese companies have dissolved their poison pills in the past two years, and that most of them did so out of concern such schemes would hurt their stock prices.

The abolishment movement seemed to gather momentum in the past month as Shiseido and eAccess pulled the plug on their defence schemes. Shiseido in particular is well known in Japan and its actions could influence other firms.