Japanese Government Blocks MBK's Acquisition of Local Machine Tool Firm Over 'Security Concerns'

Recommendation to Suspend Makino Milling Machine Acquisition Plan

Public Tender Offer Delayed Multiple Times Before Government Intervention

The Japanese government has put a halt to private equity firm MBK Partners' plan to acquire a Japanese machine tool manufacturer. The official reason cited is national security concerns, as machine tools can be repurposed for weapons manufacturing.

On April 23, the Nihon Keizai Shimbun reported that the Japanese government has recommended MBK Partners suspend its plan to acquire Makino Milling Machine. This decision appears to be based on the Foreign Exchange and Foreign Trade Act (FEFTA), commonly referred to as the Foreign Exchange Act, due to perceived security risks.

Previously, in 2008, the Japanese government issued a suspension order to a British investment fund planning an additional purchase of shares in the electric power company J-Power. To date, this has been the only instance where a suspension recommendation or order was issued through a pre-screening process under the Foreign Exchange Act. Since the law was amended in 2017, MBK Partners is the first to receive such a suspension recommendation.

Machine tools are considered a "core industry" under Japan's Foreign Exchange Act because they are classified as dual-use goods (items that can be used for both military and civilian purposes). As a result, foreign investors must undergo a government review before acquiring shares. Makino mainly manufactures ultra-precision machining centers used for aircraft engine parts, turbine blades, and high-precision mold processing.

Companies receiving a recommendation to suspend an acquisition plan must decide within 10 days whether to comply. If the recommendation is rejected, the Japanese government may issue a suspension order.

Previously, MBK Partners acted as a "white knight" when Makino faced a hostile takeover attempt by Japanese industrial equipment maker Nidec last year. In June of last year, MBK Partners announced its intention to make Makino a wholly owned subsidiary through a public tender offer. MBK Partners proposed a price of 11,751 yen per share, totaling approximately 270 billion yen (about 251 billion KRW), which is 751 yen higher per share than the 11,000 yen per share and 257 billion yen total tender offer price proposed by Nidec. The Makino board reportedly supported MBK Partners' proposal, citing the importance of maintaining management independence and stability of existing business operations. However, due to delays in screening under Japan's Foreign Exchange Act, the public tender offer was not launched. Even as of April 10, the schedule was postponed, with the tender offer expected to begin in late June, but ultimately, the Japanese government intervened to halt the process.

This content was produced with the assistance of AI translation services.