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 user 2005-03-31 at 10:06:00 am Views: 81
  • #11182
    Politeness Out, Hostility In As Takeover Roils
    TOKYO – It has happened before in
    the United States: a fast-growing Internet start-up sets its sights on an
    old-line media company, and, in the end, gets it. That was the AOL takeover of
    Time Warner in 2000.

    Until now, though, something like that seemed unlikely in
    Japan, where only a handful of hostile takeovers have been attempted. But a
    court ruling on Wednesday set the stage for a 32-year-old entrepreneur, Takafumi
    Horie, and his Internet company, Livedoor, to gain a majority stake in Nippon
    Broadcasting System Inc., a 50-year-old radio broadcaster.

    In addition, Mr. Horie’s company, which offers Internet
    services and operates a Web portal similar to Yahoo, has a chance to gain
    significant influence over the management of Nippon’s larger affiliate, Fuji
    Television Network, the core company in one of Japan’s largest media groups.

    Because the contentious battle for control of Nippon, which
    began last month when Livedoor announced that it had bought a controlling stake
    in the broadcaster, is a rarity for Japan, the clash is being followed with a
    media blitz befitting a celebrity murder trial. The spike-haired Mr. Horie, who
    prefers T-shirts and khakis, is being portrayed as the representative of a
    young, more Westernized Japan taking on the country’s clubby corporate

    “This is a young Japanese who has got a vision, and he’s
    got the guts,” said Jesper Koll, chief economist for Merrill Lynch in Tokyo.
    “The Japanese are no longer afraid to take on their own elite.”

    The battle also highlights the shift in Japan from what is
    known as stakeholder capitalism, under which the interests of a company’s
    employees, business partners or managers were often given higher priority than
    increasing the company’s bottom line. Taking its place is an increasingly
    Western approach in which companies are under pressure to think first about
    their shareholders.

    The ruling on Wednesday by the Tokyo High Court blocked a
    planned move by Nippon to transfer a majority stake in itself to Fuji TV by
    issuing share warrants to the television company. Fuji would then have been able
    to convert the warrants into new shares in Nippon, potentially more than
    doubling the number of outstanding shares in the radio company. That would have
    greatly diluted the holdings of Livedoor and other current shareholders.

    But the High Court, upholding a lower court, said that the
    only purpose of the sale was to keep Nippon under the control of its current
    management and that the sale, therefore, did not have any strategic value.

    “It’s regrettable, really regrettable,” the president of
    Nippon, Akinobu Kamebuchi, said after the ruling. “We were sure justice would be
    on our side but that was not accepted. It’s really too bad.”

    He added that Nippon would scrap the warrant sale and was
    now evaluating what to do next. It could appeal the decision to the Supreme

    The ruling clears the way for Livedoor, with a market
    capitalization of 236 billion yen, or $2.2 billion, to take over management of
    Nippon, with a market cap of 206 billion yen, or $1.9 billion, later this year.
    Livedoor had a 49.78 percent stake in Nippon Broadcasting as of last Thursday
    and was expected to be able accumulate a majority stake in time to elect its own
    directors to the broadcaster’s board at the next shareholder meeting in

    Livedoor raised the money it needed to buy the Nippon stock
    with a sale of 80 billion yen (about $750 million) in bonds, arranged by Lehman
    Brothers. The bonds would then be convertible to Livedoor stock after the

    “We want to work now to raise the value of Nippon
    Broadcasting and its group companies,” Mr. Horie said after learning of the
    court’s decision.

    Mr. Horie has said he wants the radio broadcaster so he can
    advertise on its programs and draw listeners to his Internet sites and services.
    He also said he believed that traditional media and the Internet would
    inevitably become more closely integrated and he wanted to be at the forefront
    of the change in Japan.

    “I tried to do business with broadcasters over the last
    five years but they are too slow to make decisions,” Mr. Horie said in a speech
    this month. “We have to speed up this process. Of course, everyone would prefer
    a friendly approach but I felt we don’t have time for that friendly

    Gaining control of Nippon could also give Livedoor a strong
    say in the boardroom of Fuji TV, Japan’s largest private television network,
    because Nippon is Fuji’s largest shareholder, with a 22.5 percent stake.

    Media reports have said Mr. Horie has set his sights on
    increasing his stake in Fuji even further and the network has been beefing up
    its defenses against a takeover attempt.

    This week, Fuji said it was prepared to issue up to 50
    billion yen in new shares to fend off an unwanted bidder. The company also
    announced that it would raise its fiscal year-end dividend to 5,000 yen a share
    from the previously announced 1,200 yen, giving shareholders a strong incentive
    to hang on to their stocks.

    But a Livedoor executive suggested Wednesday that the
    company would take a more conciliatory approach toward Fuji TV than it had in
    its pursuit of Nippon. Livedoor does not intend to raise its stake in Fuji
    without the approval of that company’s management, Livedoor’s senior vice
    president, Fumito Kumagai, said Wednesday, according to a company spokesman,
    Koichiro Ohta.

    Mr. Horie, a college dropout, built Livedoor into one of
    the country’s best-known Internet companies by combining a portal site with
    online brokerage and banking and a host of other Internet services. The company
    posted a profit of 3.58 billion yen for the year ended Sept. 30 on sales of
    30.87 billion yen. By that measure, the company is still a long way behind its
    top rival, the Yahoo Japan Corporation, which had sales of 75.78 billion yen in
    its most recent fiscal year, which ended March 31, 2004.

    Aside from shaking up corporate Japan, Mr. Horie’s takeover
    bid also promises to change the landscape for mergers and acquisitions in

    Although Mr. Horie is Japanese, his aggressive tactics and
    early success have unleashed fears that a horde of foreign companies might try
    to buy up Japanese firms using his methods as a model. Although analysts say a
    wave of such acquisitions is unlikely, ruling-party politicians are nonetheless
    threatening to delay long-anticipated legal changes that would have allowed
    foreign companies to buy Japanese companies through stock swaps.

    On the other hand, many analysts and lawyers say that the
    attention the battle has generated could lead to a more thorough overhaul of
    laws governing takeovers that would benefit the industry in the long run.

    “This is a very good event to educate Japanese people,”
    said Nobutoshi Yamanouchi, a lawyer in the Tokyo office of the American law firm
    of Jones Day. “Some people don’t like to see Japan transforming into a
    Western-style society but in my opinion in order to have international or global
    competitiveness, this step is necessary.”

    Many ordinary Japanese have also applauded Mr. Horie’s
    effort even if they find his aggressive style somewhat distasteful. Polls show
    that he has broad support for his takeover attempt among both younger and older

    “I like what’s happening,” said Hitashi Suzuki, a
    35-year-old employee of a construction company in Tokyo. “It is very modern and
    suits the time we live in. I wouldn’t say I support Mr. Horie personally, but I
    think it is good that he fights for what he wants.