Square Enix Bids $200 Million To “Rescue” Tecmo

Posted by Liz Surette on September 3, 2008

Despite the success of Ninja Gaiden and notwithstanding the loyal cult following that games such as Fatal Frame command, there is no denying that Tecmo has fallen on hard times lately. Former employees are suing for unpaid overtime (reminiscent of past EA employee litigation), their stock price has plummeted, and they are still reeling from their president Yoshimi Yasuda’s abrupt departure. In light of all this, Square Enix has offered this “friendly” takeover bid of 22.3 billion yen in an attempt to “provide the group with further growth oppurtunities” according to Square Enix’s president Yoichi Wada.

The bid is unsolicited and expires on September 4th, and for it to go through, Tecmo’s Board of Directors must approve it. Speculation alone caused Tecmo’s stock to increase substantially last week. So far no response has come from the Board, and if that remains the case after the deadline then Square Enix will withdraw their proposal.

Due to the closeness of the deadline and lack of response, it may be reasonable to assume at first that the Board will do nothing. However, we have no knowledge of what is going on behind boardroom doors. If Japanese corporate law resembles American corporate law, the Board owes a fiduciary duty to their corporation (and by extension to the stockholders) to act according to the best interests of the company. Should the Board decide not to accept the bid and Tecmo takes a nose-dive, shareholders may be able to file a derivative action against the Board for negligence (how far they get would depend on Japan’s law regarding the limited liability of the Board and officers). This specter combined with the knowledge of the stockholders’ interest in protecting their investment may induce the Board to consider or even decide to accept the merger as I write this. From a financial standpoint, Tecmo would be wise to at least consider this bid, and it could even be a possibility–although from a consumer standpoint it could be argued that competition among many publishers and many developers is more beneficial to the game industry than corporate takeovers.

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