Nintendo’s Founding Family to Sell Shares as Buyback Terms Set

Nintendo Co. (7974)’s founding Yamauchi family wants to sell its holdings in the world’s biggest maker of video-game machines as the company set terms for a 114.2 billion-yen ($1.1 billion) share buyback.

The company will purchase as many as 9.5 million shares, or 7.4 percent of its outstanding stock, at 12,025 yen apiece from interested investors today, Kyoto, Japan-based Nintendo said in a statement after yesterday’s market close. The heirs to former Chief Executive Officer Hiroshi Yamauchi, who owned about 10 percent of the total shares before his death in September, “desire to sell,” it said.

Nintendo announced plans for the buyback as President Satoru Iwata seeks new hit products after the Wii U console flopped with consumers. The company shocked the market in January when it forecast a surprise annual loss, cut sales projections for hardware and games, and said it’s considering a new business model.

Yamauchi, who ran the company for 53 years, gave his stake to his four children after his death. The heirs will have to pay taxes on the stock they inherited, the company has said.

“We are not in a position to know how much shares the Yamauchi family will sell,” said Yasuhiro Minagawa, a spokesman for Nintendo.

Nintendo, which had about $8.6 billion of cash and equivalents and zero debt as of Sept. 30, is seeking to reassure investors it has a plan to fix its ailing console business. Since reaching an all-time high share price of 72,100 yen in November 2007, the company has lost more than 80 percent of its value.

The company is studying new ways to revive sales after previously ruling out licensing franchise characters such as Mario and Zelda for online games or smartphone applications.

Game Boy

When Iwata was appointed in 2002, he became the company’s first president from outside the Yamauchi family since it started selling cards in the late 19th century. Iwata subsequently tripled revenue by introducing such hits as the Game Boy Advance SP, the Wii and the Nintendo DS handheld player.

Yet the casual gamers who made Nintendo the leader of a $93 billion industry have abandoned the Wii U for cheap downloads they can play on a Samsung Electronics Co. (005930) Galaxy smartphone or an Apple Inc. iPad. The Wii U also lost its appeal to many dedicated gamers, who prefer the Sony Corp.’s PlayStation 4 or Microsoft Corp.’s Xbox One.

Net income plunged 77 percent in the third quarter ended Dec. 31 to 9.6 billion yen, according to figures derived from nine-month totals announced Jan. 29. Operating profit fell 6.9 percent to 21.7 billion yen.

Nintendo sold 2.4 million Wii U units in the nine months ended Dec. 31, the company said. Sony last month said it sold 4.2 million units of its PS4 since it went on sale Nov. 15, and Microsoft shipped more than 3 million Xbox One machines.

Iwata is taking a 50 percent pay cut from this month until June, while other directors will take reductions of as much as 30 percent. The 54-year-old president has said he won’t step down and has no plans to change managers in the near term.

To contact the reporter on this story: Takashi Amano in Tokyo at tamano6@bloomberg.net

To contact the editor responsible for this story: Michael Tighe at mtighe4@bloomberg.net

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