#Japan #Tokyo #MCJ #Ascender Capital #MBO

Ascender Capital Raises Concerns Over MCJ's MBO

On February 18, 2026, Ascender Capital Limited, a Hong Kong-based investment firm focusing on premier Asian companies, publicly expressed significant concerns regarding the management buyout (MBO) of MCJ (6670 JP) due to potential conflicts of interest. The firm called for better shareholder protection and clarified its stance on the matter, considering the impact such transactions could have on general shareholders.

Ascender Capital has been a long-term shareholder of MCJ and has been actively engaging with its management for over two years. Through multiple meetings, letters to the board of directors, and presentations, they have emphasized the importance of governance and capital allocation within the firm. Their recommendations have aimed at improving long-term corporate value which, they believe, would ultimately benefit all stakeholders. Key suggestions included an appropriate buyback scheme, increasing dividends, ensuring independent external directors make up a majority on the board, and enhancing the quality of disclosures, particularly emphasizing the need for English translations of all materials.

In light of the announced MBO at ¥2,200 per share (15.3 times PE ratio), Ascender Capital highlighted the potential conflict of interest as the largest shareholder, Mr. Takashima, plans to resubmit capital after the phase-out of listing. Furthermore, the structural agreements currently in place could inhibit competitive bids from potential acquirers. In situations of possible conflicts of interest, it is crucial to reinforce protections for general shareholders and implement robust processes, which the Ministry of Economy, Trade and Industry guidelines reference.

Adding to these concerns, MCJ has maintained a dividend payout ratio of around 30% (excluding the commemorative dividend for the fiscal year ending March 2024) for over ten years, with very limited share buybacks. As a result, MCJ's net cash has accumulated to approximately ¥42 billion, accounting for about 28% of the market capitalization at the time the MBO was announced.

Discrepancy Between MBO and DCF Projections

Ascender Capital raised concerns regarding discrepancies between the management projections presented in the Mid-term Management Plan published on May 14, 2025, and the Discounted Cash Flow (DCF) analysis. The disclosed figures indicate that, for the fiscal year ending March 2028, the Mid-term Management Plan expects revenues of ¥236.9 billion and operating profit of ¥21 billion, while the DCF assumptions set the expected revenue at ¥246 billion and operating profit at ¥26 billion. Such a disparity signals a forecast of higher growth and an improvement in the operating margin from 8.9% to 10.6%.

If management genuinely believes in the feasibility of this elevated growth trajectory and margin enhancement, Ascender Capital argues it warrants an explanation as to why there were no adjustments to the Mid-term Management Plan before the MBO was announced. Shareholders should demand clear explanations concerning the key drivers of free cash flow and the factors contributing to these discrepancies.

Premium Analysis and Fairness of Offer

MCJ claims that the offered price of ¥2,200 reflects a reasonable and fair premium based on a benchmark analysis. Nonetheless, Ascender Capital raises concerns over the adequacy of the benchmark methodology, pointing to a limited sample size of only 22 cases, along with questions about the robustness of filtering and the disclosure of distribution.

Additionally, the analysis inherently depends on the pre-transaction stock price, and if a more timely disclosure of an adjusted Mid-term Management Plan had taken place before the MBO announcement, the pre-transaction stock price could have been higher. In such a scenario, the premium would likely have been lower than the cited approximately 40%.

Ascender Capital insists on clarifying the timing of disclosures and assessing how the board and special committee evaluated the impact of the pre-transaction stock price and the premium analysis.

Clarity on Negotiation Processes

The release indicated that sufficient negotiations had occurred under the special committee's guidance, yet Ascender Capital pushes for clearer disclosures regarding why the committee concluded that ¥2,200 constituted a fair value. They point to the committee's request for additional price escalations following the third price proposal, indicating a need for detailed explanations justifying the offer.

Ascender Capital emphasizes that more thorough disclosures must detail the reasons why the final price escalation was rejected and how the board and special committee justified accepting a non-incremental response.

Call for Shareholder Protections and Enhanced Disclosures

Given the high potential for conflicts of interest, Ascender Capital has called for the adoption of conditions to ensure minority shareholder protections, as well as conducting an active market check before transactions and providing trustworthy disclosures. They also emphasize the need for an independent fairness opinion if conditions for majority shareholder protection are not included.

Ultimately, Ascender Capital emphasizes that maintaining the listing while enhancing value creation must be a viable alternative. MCJ has the capacity to implement Ascender Capital's suggestions for value enhancement while maintaining its public listing, thereby allowing all shareholders an opportunity to benefit from enhancements in corporate value and valuation.

The firm insists on a prompt and transparent response to their inquiries regarding the MBO and their safeguarding suggestions for general shareholders.