Cerberus Fight for Seibu Boardroom Nears Climax at Investor Vote
Cerberus Capital Management LP’s Dan Quayle, former U.S. Vice President, and John Snow, former U.S. Treasury Secretary, face Seibu Holdings Inc. shareholders today as the private-equity company battles for control of the Japanese rail and hotel operator.
Cerberus, Seibu’s largest shareholder with a 35.5 percent stake, has recommended Quayle, Snow and six others become directors at the unlisted company as part of a plan to boost profitability before selling shares.
The plan, which goes before Seibu’s annual shareholder meeting today in Tokyo, faces stern opposition from Seibu President Takashi Goto and investors like Yoshiaki Tsutsumi, once the world’s richest man, who support existing management. The battle takes place as Prime Minister Shinzo Abe calls on Japanese companies to open up boardrooms and billionaire investor Daniel Loeb tries to force change at Sony Corp. (6758)
“Overseas funds that invest in Japan usually find things don’t go that well,” Mitsushige Akino, who oversees the equivalent of about $500 million in assets in Tokyo at Ichiyoshi Investment Management Co. “Shareholders are seen as just one of several stakeholders, including banks and employees.”
Stephen A. Feinberg’s fund has spent about 120 billion yen ($1.2 billion) acquiring its stake in Seibu, which was delisted from Tokyo’s stock exchange in 2004 for breaking exchange rules by misstating stakes. In comparison, Cerberus oversees more than $20 billion in investments and spent $7.4 billion to buy an 80.1 percent stake in Chrysler LLC in 2007.
In addition to Quayle, chairman of Cerberus Global Investments, and Snow, Cerberus has recommended directors including Hirofumi Gomi, a former commissioner of Japan’s Financial Services Agency, Yuji Shirakawa, former chairman of Citigroup Global Markets Japan Inc., and Louis J. Forster, a senior managing director at Cerberus.
Seibu management has submitted its own list of candidates for the board who will be more profitable for the company, Shuhei Akasaka, a spokesman for the company, said last week.
That list and Seibu’s current business strategy will be backed by Tsutsumi, who holds 36 percent of Seibu’s second-largest shareholder NW Corp. The investor amassed a $16 billion personal fortune while at the helm of Seibu and was named the world’s richest man by Forbes magazine in 1990.
Seibu lowered earnings forecasts on March 26, five days before the end of the fiscal year, cutting its estimate for operating profit before interest, taxes, depreciation and amortization by 3 billion yen to 78.1 billion yen, from at least 81.3 billion. Two months later, its reported earnings beat that prediction by 2.1 billion yen.
Prince Hotels Inc., owned by Seibu, runs a chain of 50 hotels in Japan and around the world, including the Hawaii Prince Hotel Waikiki. Seibu got 155 billion yen, about a third of its revenue of 459 billion yen, from its hotel and leisure businesses in the year ended March, according to the company.
The resistance Cerberus faces shows domestic opposition to the influence of foreign funds remains strong. T. Boone Pickens gave up his attempt to gain a board seat in the 1990s at Koito Manufacturing Co. (7276), while Christopher Cooper-Hohn’s Children’s Investment Fund Management UK LLP failed in 2008 as did Warren Lichtenstein’s Steel Partners in 2010 with separate Japanese companies.
Prime Minister Abe wants to add outside directors to companies to increase independence and aims to double foreign direct investment in Japan to 35 trillion yen by 2020, according to the government’s strategy for economic growth.
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