Shares of Pentax jumped 7% after Hoya said it would make a tender offer for the Japanese
camera and medical equipment maker, but it remains unclear whether the bid will succeed with Pentax's board split and its president set to resign.
Hoya said on Friday it would likely pay 770 yen a share in a tender offer that placed a premium on a previous stock swap deal proposed in December.
The high-tech glass maker was forced to switch to a sweetened tender offer scheme after a majority of Pentax's board expressed opposition to the merger, reflecting pressure from key shareholders who felt the swap ratio undervalued the firm.
Hoya has not officially proposed the tender offer to Pentax but plans to hold a board meeting as soon as Tuesday to finalise the decision, according to a spokeswoman.
Whether the two companies will seal a friendly takeover deal is under question after Pentax President Fumio Urano said six of the eight Pentax board members expressed objections to a merger with Hoya at a meeting on April 4.
"Even if the tender offer succeeds, Hoya could face limits in managing the business given that some Pentax executives are opposed to the merger, according to some media," Masahiro Nakanomyou, an industry analyst at Mitsubishi-UFJ Securities, said in a report.
The Pentax deal is Hoya's latest and biggest bet to open new avenues into highly lucrative markets. Pentax is known for its expertise in advanced digital cameras, medical endoscopes and lenses used in DVD players, but it has suffered from low profitability amid competition and lack of efficiency.
Analysts have said Hoya's swift management style and its vow to open corporate governance may help Pentax speed up decision-making, cut costs and grab market share.
The Pentax board will decide on its response to the Hoya tender offer at a meeting on Tuesday, Urano said.
Hoya said it plans to buy a majority stake in Pentax in a tender offer with a price 19% above Pentax's theoretical price of 648 yen, based on the earlier swap ratio and Hoya's closing price of 4,100 yen on Friday.
The new offer values Pentax at 98.5 billion yen (US$825 million).
Under the initial agreement in December, Hoya was to swap 0.158 of its shares for each Pentax share, for a premium of 10 percent based on share prices then. But Pentax has been trading at a premium to the ratio amid speculation that shareholders would reject Hoya's terms.
According to filings in March, Sparx Asset Management held close to 24% of Pentax, making it the top shareholder. Other big shareholders included Fidelity Investment, Mizuho Corporate Bank and Morgan Stanley Japan.
Following the split with other board members, Pentax's Urano also said he is set to resign from his current position, and Takashi Watanuki, a board member, will probably become the new president.