Changes happen quickly...

Tokyo, Japanâ€" Pentax Corporation and Hoya Corporation, a Japanese maker of optical glass, announced in separate releases that they are no longer in discussion regarding the planned merger of the two companies. The agreement was to be signed this month and completed on October 1, 2007.

At a special meeting of its board of directors on April 10, Pentax adopted a resolution stating “the merger shall be abandoned at this point in time due to conditions within the company as well as conditions outside the company, including shareholders.� The company said, however, it will continue discussions with Hoya on “management integration in a broader sense,� based on the December 21, 2006 understanding.

Then in a move Pentax said would strengthen its management structure, its board appointed a new president and CEO. Takashi Watanuki, who opposes the merger, was named the company’s president and CEO, replacing Fumio Urano who remains with Pentax as a director. In addition, CFO Katsuo Mori, an executive vice president and CFO, was also appointed director.

While Pentax would not elaborate on the internal conditions that lead to the merger falling through, the Wall Street Journal reports that the opponent of the deal was its president, Fumio Urano, revealing a split within the company, and that shareholders were seeking a better offer.

According to Hoya, the two companies “found it difficult to achieve integration through a share swap merger due to the circumstances of certain shareholders of Pentax as well as the existing contract between Pentax and the third party.� On April 7, Hoya proposed to Pentax that they begin discussions on a takeover offer from Hoya in place of a share swap, which was approved unanimously by Hoya’s board. Hoya had earlier agreed to pay out approximately $770 million in shares.

Hoya said it “has not received a response from Pentax regarding the proposal,� but on April 10 did receive a letter from Pentax citing that Pentax was abandoning the planned merger and would instead proceed with studies on an operational integration with Hoya in a broad sense. Hoya’s board, while not yet abandoning the merger, has agreed “to continue to talk with Pentax aiming for management integration of the two companies as well as to confirm with Pentax the intention meant by the letter.�

In December 2006 when the agreement was announced, Hiroshi Suzuki, Hoya’s president and CEO, who was to be president and CEO of the new entity, stated, “We see this as a friendly and equal merger.� That may change now, and according to the Journal, if Hoya turns hostile, Pentax may use the "poison pill" takeover defense it introduced with shareholder approval in 2005. This would give Pentax shareholders the right to buy new shares cheaply if an unsolicited bidder for the company emerges.


April 2007