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Murata Must Raise Toko Tender Offer Price, Religare Says

Murata Manufacturing Co. may have to boost its 300 yen a share takeover bid for Toko Inc. to as high as 355 yen after the stock climbed above the initial tender price, according to Religare Capital Markets Ltd.

Shares of Toko gained 3.3 percent today to close at 344 yen, 15 percent above the 300 yen bid made in February. Murata, which is aiming for a 66.6 percent stake in the maker of semiconductors and power supplies, will need to increase its offer to ensure continued support from Toko’s board, according to Lee Mitchell, Singapore-based special situations sales trader at Religare.

“We don’t expect Toko management will be able to maintain their recommendation and Murata will need to bump considerably to take control,” Mitchell wrote in a note to clients yesterday, advising them to buy the shares. “Another reason we think the offer will be bumped is purely because of the language in the offer announcement.”

Murata, a component supplier to Apple Inc. and Samsung Electronics Co., announced three acquisitions in February to expand its lineup and speed development. It’s already Toko’s biggest shareholder at 9.8 percent, according to data compiled by Bloomberg. The 300 yen per share represented a premium of about 39 percent over Toko’s closing price on Feb. 13, the day the tender was made public.

Murata added 0.9 percent today to 7,590 yen. The Topix index rose 0.8 percent to 1,206.25.

Akiko Fukuda, a spokeswoman for Murata, declined to comment on the possibility of raising the offer. Taku Makino, a spokesman for Toko, said he didn’t know whether the bid would be increased as it depended on Murata.

“Investors are looking at the actual situation at Toko and assessing that the offer price is too low,” Mitsushige Akino, chief fund manager at Ichiyoshi Asset Management Co. in Tokyo, said by phone today. “The market is pressing Murata to raise the bid.”

Wording in the takeover statement from February, such as the tender offer is “expected” to be 300 yen per share, indicates both companies knew they would need to revisit the price before finalizing the agreement, Mitchell said.

Toko’s board will have to re-recommend the offer to shareholders after China’s Ministry of Commerce approves the takeover, which could be “any day now,” according to Mitchell. Over the next four to six weeks, there may be “heightened activity” after permission is granted, he said. Government approval is required as both companies sell products in the country, he said.

Toko gets 41 percent of revenue from China, making Asia’s biggest economy its top market. Murata counts on China and Taiwan for 55 percent of sales.

“Now is the time to buy Toko,” Mitchell wrote. “We believe Toko and Murata will agree a deal with a bump. The magnitude of the bump is guesswork, but using the original 39 percent premium offered and then adding the move in the Topix, which will give 350 yen to 355 yen.”

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