Singapore Fund Seeks Court Ruling on Mitsui Life Takeover Price

  • Claims Nippon Life acquired shares too cheaply during takeover
  • Should have used Mitsui Life's embedded value: TIH Chairman

TIHT Investment Holdings Pte, a Singaporean private equity firm partly owned by Temasek Holdings Pte, asked the Tokyo District Court to review the price Nippon Life Insurance Co. paid to buy its stake in another Japanese insurer, claiming that it was too low.

TIHT was forced to sell its shares in Mitsui Life Insurance Co. when Nippon Life made the takeover last December. The process for setting the price ignored embedded value, or EV, a measure used to gauge the worth of life insurers that combines the present value of future profits with adjusted net assets, Kin Chan, chairman of TIH Ltd., the majority owner of TIHT, said in an interview last month.

Mitsui Life should have been valued at 1,746 yen a share, more than three times the acquisition price, according to a summary of papers filed to the court on April 1 by lawyers representing TIHT. Nippon Life acquired 92.16 percent of the voting rights of Mitsui Life in a tender offer on Dec. 29 at 560 yen a common share, the document showed.

The deal was valued at about 334 billion yen ($3.1 billion), according to data compiled by Bloomberg. Osaka-based Nippon Life, Japan’s biggest life insurer, and its competitors have been making acquisitions, particularly abroad, as they contend with a shrinking and aging population at home.

Forced Sale

A 2014 revision to Japan’s Companies Act enables a shareholder holding more than 90 percent of a company to forcibly purchase the remaining stock. It also provides an avenue for sellers to protest in court if they disagree over pricing. TIHT owned 7.64 percent of Mitsui Life as of March 31, 2015.

TIHT claims that despite Mitsui Life itself disclosing EV as “an effective indicator of corporate value” the takeover price was set below that amount. Nippon Life and Mitsui Life used measures including the dividend discount model -- a method that takes into account the present value of future dividends -- and valuations of listed life insurers Dai-Ichi Life Insurance Co. and T&D Holdings Inc. as a reference, the document showed.

Spokesmen for Nippon Life and Mitsui Life declined to comment on the case.

As of December, Dai-Ichi Life traded at 0.42 times EV and T&D Holdings was 0.45 times, according to data compiled by Bloomberg. That is cheaper than France’s Axa SA and Italy’s Assicurazioni Generali SpA, which traded at 1.13 times and 0.87 times EV respectively, the data show. Neither Nippon Life or Mitsui Life are publicly traded.

In a Bloomberg interview in December, Dai-Ichi Life President Koichiro Watanabe said EV was used by European insurers as an indication of value but investors in the U.S. and Japan were reluctant to employ it.

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