Tokyo court halts Toho poison-pill targeting 3D investor

A Tokyo District Court has issued an injunction preventing Toho Holdings from activating a takeover defence that would have issued warrants to dilute the stake of Singapore-based activist investor 3D Investment Partners. 3D is seeking to raise its holding to 27%, and the injunction stops the company from issuing the targeted warrants while the dispute is reviewed.

Under the contested plan, warrants would be triggered if an investor’s holding exceeded 24%, a threshold set by Toho. The company secured shareholder approval for the defence at its annual meeting in June, with 54.7% of votes cast in favour of the measure.

Toho, a pharmaceutical wholesaler, argued that a 27% holding by 3D could give the investor substantial influence over corporate decisions and could encourage strategies focused on shorter-term returns. In a filing with the Tokyo Stock Exchange, Toho indicated it will challenge the court’s injunction. 3D Investment Partners did not immediately comment.

The defence employed by Toho is a form of so-called poison pill, in which a company issues new shares or warrants in a way that reduces the percentage ownership of a particular shareholder. Japanese companies have increasingly considered such measures in response to activist investors who build large stakes and press for changes such as improved capital efficiency, business restructuring and higher cash returns to shareholders.

Previous Japanese court decisions have treated shareholder approval as a factor that can support the legitimacy of takeover defences. The Tokyo court’s order shows that courts can halt a previously approved measure when a legal challenge alleges the defence discriminates against a specific investor.

The injunction leaves the question of whether targeted takeover defences that single out one investor are lawful in Japan unresolved. The court will review the case while preventing Toho from issuing the warrants at the centre of the dispute.