US fund Taiyo says it may buy into Brother bid for niche Japanese printer

By Rocky Swift and Miho Uranaka

TOKYO (Reuters) - The U.S. fund in a buyout battle for a niche market Japanese printer company said it would consider selling to rival bidder Brother Industries if it can say how it would manage the target company better.

The tussle over Roland DG, a low-profile maker of commercial printers, may herald an increase in contested deals in Japan, where a reform push by the Tokyo exchange has sparked a slew of share buybacks, unwindings of cross-shareholdings, and management buyouts (MBO).

Taiyo Pacific Partners, the biggest stakeholder in Roland DG, with a 19% stake, launched its tender offer in February, offering 5,035 yen ($32.64) per share that was a 30% premium at the time. A month later, Nagoya, Japan-based Brother, known for its home printers, countered with a 5,200 yen per share offer.

Brian Heywood, executive officer of Washington state-based Taiyo, said the onus is on Brother to show how it can resolve problems that emerged between it and Roland DG on a co-managed project in recent years.

Roland DG is "now a strong Japanese company that has been approached by a bully with a lot of money, who tried to do something with them before and it was unsuccessful," Heywood told Reuters on Wednesday.

"If Brother comes out and can address those issues, and it's an appropriate price, we're willing to consider selling into the deal," he added.

Heywood joined Roland DG's board in 2020 after a period of what he calls "very bad performance." From the low that year, the shares have surged about five-fold to 5,490 yen as of Thursday.

For its part, Brother said in its tender proposal that synergies between the two companies would enable them to "provide superior and new value in the industrial printer market".

Taiyo manages about $2.1 billion in investments, primarily in Japan and India. The "friendly activist" fund previously took private the electric piano maker Roland Corp, the former holding company of Roland DG, before relisting the shares.

The fund last week extended the tender period for Roland DG. More extensions are possible, Heywood said, adding that he had no immediate plans to raise his offer and may rescind it, depending on the next steps by Brother and Roland DG's management.

Japan saw 28 MBOs in 2023 worth a combined 628 billion yen, the most in 17 years, according to LSEG data. With unprecedented focus on corporate value and governance in Japan, contested buyouts such as Roland DG's are likely to rise, Heywood said.

"I think this is a good thing macro wise for Japan," he said. "There's a lot of opportunities for small companies in Japan to proactively fix themselves or to do mergers themselves."

($1 = 154.2400 yen)

(Reporting by Rocky Swift and Miho Uranaka. Additional reporting by Makiko Yamazaki. Editing by Gerry Doyle)