Japanese Business Giant Launched Hostile Takeover Of Desanto, Involving Anta.

According to Japanese economic news (NIKKEI), there has been a rare hostile takeover between two big enterprises in Japan recently, involving Japanese comprehensive enterprise Itochu and Japanese sports brand Desanto (DESCENTE).

It involves China's business and Anta, a Chinese company.

Itou Tada was Desanto's largest shareholder. They announced an offer of 20 billion yen (US $182 million) to acquire Desanto shares in January 31st (a premium of 50% per share), raising its stake in Desanto to 40%, in order to achieve stronger influence on Desanto and veto power on the proposal.

Prior to that, Itou Chumi raised its share from about 25% to about 30%.

The Nikkei said that at present, Itochu has no problem in acquiring another 10% stake through acquisition, which will have an impact on Desanto's board of directors.

The gap between Desanto and their major shareholders broke out through the takeover proposal. "This purchase announcement was made unilaterally, without prior notice to our board of directors and no advance consultation," Desanto said.

Desanto, President and founding member of the MasatoshiIshimoto, said Itou Tada had not been informed when he increased his stake in October.

The Osaka based company expressed opposition to takeover in February.

According to Nikkei, the relationship between the two companies can be traced back to 1960s, but cracks began in 2013.

That year, Desanto appointed the founding family member, MasshoshiIshimoto, as president, without telling Itou Tada first.

When Desanto announced his comprehensive business cooperation with underwear and underwear manufacturer WacoalHoldings in August 2018, he did not communicate with Itochu.

The two companies have long been divided on overseas strategies.

Itou Tada believes that Desanto is too dependent on Korean business (accounting for half of its revenue). Its growth rate in two markets in China and Japan is lower than expected, along with the brand's steady business in South Korea. Itou Tada hopes to urge Desanto to seek growth outside the Korean market.

"Desanto needs to have a growth strategy so that it can open 1000 stores in China," said an itoin executive.

In his takeover announcement, Itou Tada said, "(Desanto) has not shown any willingness to seriously consider these issues."

They believe that the management capability of the management is "insufficient" and fails to fulfill its responsibilities to explain the problem to shareholders.

But Desanto management is worried that if the brand expands its overseas business without proper planning, it may be damaged.

The Nikkei believes that Desanto may not be reluctant to expand abroad, but the company wants to ensure that while expanding, it protects the position and reputation of its high quality commodity manufacturers.

Desanto is expected to achieve a combined net profit of 6 billion 500 million yen in the last fiscal year, which will contribute less than 2 billion yen ($18 million 300 thousand) to Itochu.

Compared with the 500 billion yen profits produced by Itochu group, it seems insignificant.

But Desanto will become an indispensable part of Itochu's expansion of its textile business.

The Nikkei quoted sources as saying that Itou Tada's "core textile business lacks momentum". "Management may wish to activate Desanto as a pillar."

In addition, Itou Tada's stock purchase plan for Desanto also concerns Anta, a Chinese company of concern.

In 2016, Anta and Desanto and Itou Tada jointly established a joint venture in China. According to the joint venture letter signed by the three parties, the initial injection of the joint venture company was 250 million yuan (4 billion 400 million yen), and Anta, Desanto and Itou Tada would share the respective shares according to the 6:3:1 contribution ratio.

According to Nikkei's report, Ding Shizhong, chairman of Anta group's board of directors, and his relatives held 7% stake in Japan's Sant Corp., the second largest shareholder behind Itochu.

In a recent interview with the Nikkei, Ding Shizhong clearly indicated that he supported the Itochu commercial plan, including the public offer and takeover board.

"If Desanto carries out a pformation according to Itou Tada's plan, shareholders will benefit."

Ding Shizhong said.

He also said Desanto had "potential to become a global brand."

He takes China as an example. "For Desanto, it is not difficult to do big things in China."

It can be seen that Itou Tada and Ding Shizhong reached a preliminary consensus in the accelerated development of Desanto in the Chinese market.

The Nikkei reported that Desanto's new medium-term plan, which begins next fiscal year, may revolve around China's expansion.

The Nikkei said that Itochu and Anta are long-term partners.

For example, some of Anta's sportswear was made in Itochu's factory.

The two also realized that Desanto's growth in China was slow.

According to Anta's 2018 earnings report, as of the end of December, Desanto has 117 stores in China.

"We want to take advantage of our strength in winter sports," Ding Shizhong said. "In the next five years, I expect that the number of stores will increase by 30-40% per year."

He was optimistic about the growth of the stores from the opportunities offered by the Beijing Winter Olympics in 2022.

In 2018, when Desanto's number of stores in China increased by about 80%, sales grew more than 200%, showing a good growth momentum.

However, Zheng Jie, President of Anta group, emphasized that this is because the base is small. "(this growth rate) has no reference meaning, because it is basically from scratch.

But in terms of store performance and market impact, we believe that Desanto will perform well in 2019.

He believes that Desanto in accordance with the previous plan to achieve profits in 2019 "should be no problem."

With the success of FILA, Anta has gradually changed to multi brand management company. Desanto has provided new impetus for Anta group's next step development.

Ding Shizhong also hoped that the current dispute could be resolved quickly. "I do not want to see that Desanto's brand has been damaged by bad feelings among executives, directors and shareholders," Ding said. "I support all reforms to Dizon's endemic advantage."