Hostile bids are rare in Japan but have been increasing as the government promotes corporate governance reform to make management more accountable to investors.

City Index Eleventh Co, a fund backed by veteran activist investor Yoshiaki Murakami, said it would offer 3,456 yen per Toshiba Machine share to buy up to 43.82% of the molding machine maker, spending up to 25.9 billion yen ($235 million).

The offer price represents an 11% premium over Toshiba Machine's close on Friday, when the company announced that the Murakami fund intended to make a takeover bid. The shares plunged 10% on Tuesday after soaring 19% on Monday.

The fund said the current management has not fully worked to raise shareholder value, pointing out that Toshiba Machine's recent decision to tender its stake in NuFlare Technology to Toshiba was not the best option to maximise returns.

Poison pill

Toshiba Machine said late on Friday said it could adopt poison-pill measures to fend off acquisition attempts by diluting the holdings of unwanted suitors.

It added that the planned takeover bid could potentially hurt the maximisation of its corporate value and shareholders' interests.

A Toshiba Machine spokesman said on Tuesday the firm is examining the tender offer.

City Index Eleventh said in a statement the planned poison pill measures, to be implemented without shareholders' approval, are for management's self-protection and buck corporate governance progress in Japan.

Murakami-related funds currently hold a combined 12.75% stake in Toshiba Machine.

A former bureaucrat, Murakami famously led a fund targeting Japanese companies and pushing for greater shareholder returns until he was convicted of insider trading in 2007. He has since resurfaced as an investor, working with his daughter.

Murakami's typical strategy is to build up a stake in undervalued companies with assets and ask for higher returns to shareholders. Murakami's funds blocked a buyout attempt last year by U.S. investment fund Bain Capital of a small printing firm Kosaido Co by making a counter bid with a higher price.

Toshiba Corp holds less than 3% of Toshiba Machine, having sold the bulk of its stake during a management crisis in 2017.

By Makiko Yamazaki and Junko Fujita