Suntory's Yakushi-do Shrine In Osaka

As I predicted only a few days ago, a Japan family-controlled company has prevailed in its demands for a key control position in a merger with a much larger firm. Suntory Holdings and Kirin Holdings have agreed that Suntory’s founding families will hold more than a one-third stake in the combined company to be created in the merger. See Suntory prevails in talks with Kirin.

That is a big concession by Kirin, which in asset terms hold a far greater share. However, it does allow quick formation of one of the world’s largest alcoholic beverage firms, which they probably think essential in the face of current world competition.

It will give the Suntory families a veto power on key governance issues, such as further mergers, restructuring, dilution of shares, etc. Suntory had insisted that the higher stake was non-negotiable. I had expected that Suntory’s families, heirs of the founder, Torii Shinjiro, would bargain hard for this, since they have long been actively involved in control and presumably did not wish to be relegated to a purely investor status. It shows how very strong a resolute minority partner can be in forcing terms of a bargain.

It also allows them to preserve a stake in some of the social activities that Suntory provides to the community such as museums, concert halls (President Obama spoke at Suntory Hall, Tokyo in November) and sports sponsorships. All considered, it looks like a win-win situation for both parties and the community.