A Tokyo court rejected UK asset manager Silchester International Investors' request to block a bond issue by auto goods retailer Autobacs Seven in the latest rebuff of shareholder activists in Japan.

Last week Silchester filed a request to the Tokyo District Court to prevent Autobacs from issuing 65 billion yen (284 million pounds) worth of convertible bonds, claiming the deal gave effective control of the company away at too cheap a price.

Autobacs, which has more than 500 stores in Japan, said in a statement that it would go ahead with plans to issue the bonds today. The company has said it would use the funds for acquisitions abroad.

Silchester has joined a growing group of foreign funds leading a push to get corporate management in Japan to act in the best interest of shareholders, or to boost profitability and pay higher dividends.

So far the budding activist movement has not had much success.

Earlier this year hedge fund Steel Partners lost a court case to block anti-takeover moves by Bull-Dog Sauce Co while other foreign investors pushing for higher dividends at this year's shareholder meetings were for the most part rebuffed.

Silchester was upset with Autobacs' bond issue because it could boost the number of shares by 60 percent, diluting the fund's 4.6 percent stake. The bond could also put 36 percent of the company in the hands of two offshore funds.

Silchester has also taken issue with the bond being priced at a time when the stock was trading at about 0.6 times its net asset value, versus the average of 2.6 times over the past 17 years, according to data provided by Silchester.

A 15 billion yen tranche is scheduled to go to SK Advisory Limited and a 50 billion yen tranche to ARCM Ltd. Both are special purpose vehicles set up in the British Virgin Islands to help Autobacs procure funds.

Shares of Autobacs were up 1.3 percent at 2,405 yen in afternoon trade, but are still down 19 percent since the company announced plans for the bond issue on October 26.

(Editing by Malcolm Whittaker)

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