The Japanese government has asked Asian private equity firm MBK Partners to halt its acquisition of machine tool maker Makino Milling Machine, citing national security concerns. Finance Minister Satsuki Katayama told parliament that the ministry determined the deal risks undermining security due to Makino's role in defense equipment production. This is only the second such case under foreign investment laws.
Finance Minister Satsuki Katayama told parliament on Thursday that the industry ministry "determined that the investment poses a risk of undermining national security." She noted, "Makino is one of the world’s leading manufacturers of machine tools and that its products are widely used by manufacturers of Japan’s defense equipment."
MBK Partners announced its 275 billion yen ($1.72 billion) tender offer plan in June last year, but regulatory reviews delayed the expected late June launch. In a statement, the fund said it had offered measures to address security concerns and was surprised by the government's recommendation. Makino stated it was gathering information and no decision had been made.
Prime Minister Sanae Takaichi’s government this week announced its largest overhaul of defense export rules in decades, allowing exports of warships and missiles. A person involved in discussions said this shift, emphasizing defense manufacturers' importance, influenced the decision. A government official clarified the rejection "is not meant to send a message that Japan is shutting down foreign investments," while Katayama told reporters, "The view that sound investment is important for the development of Japan’s economy has not changed."
Arata Kuno, professor of international economics at Asia University in Tokyo, said the move is understandable as "once advanced technologies flow overseas, they cannot be recovered." This is only the second rejection under the Foreign Exchange and Foreign Trade Act, after a 2008 bid for Electric Power Development. Analysts noted it sets a precedent, raising risk premiums for foreign takeovers, contrasting with last year's approval of Taiwanese Yageo’s bid for Shibaura Electronics.
Makino’s tools, used for high-end components like aluminum airframes, require trade ministry export permission due to military potential.
