Cerberus Lifts Seibu Stake but Short of 44.7 pct Goal

(Reuters) – Cerberus Capital Management LP said on Saturday it had secured the one-third stake in Seibu Holdings needed to veto decisions at shareholder meetings, but fell short of its goal of buying 44.7 percent of the Japanese railway and property group.

The U.S. private equity fund launched an unsolicited bid in March to boost its stake in Seibu from the current 32.4 percent, escalating an increasingly bitter dispute over when the company should be re-listed on the stock exchange.

In April it raised its target stake in the public tender offer to 44.7 percent from 36.4 percent and proposed eight new directors, including former U.S. Vice President Dan Quayle. With one existing director due to retain his post, the proposal would give the fund exactly half of the company’s 18-member board.

While Cerberus fell short of its targeted stake, the fund, which now controls 35.48 percent of Seibu, is expected to shift its focus to a possible proxy fight to secure votes for its nominees ahead of the annual shareholders’ meeting on June 25.

Cerberus said in a statement on Saturday that it is considering taking some actions, including making inquiries about its concerns at the shareholders meeting. The details will be announced when it has been decided, it said.

Seibu responded to Cerberus’s statement, saying that it is still opposed to Cerberus’s nomination of new directors and asked its shareholders to vote against proposals made by the U.S. fund at the meeting.

The standoff between Cerberus and Seibu has been seen by some investors as a test of Japan’s receptivity to foreign capital, coming as the popular Prime Minister Shinzo Abe promises to deregulate the economy to stoke growth.

In a separate showdown between a vocal shareholder and well-known Japanese company, billionaire hedge fund manager Daniel Loeb is pushing the struggling electronics giant Sony Corp to sell off part of its lucrative entertainment arm.

Cerberus injected more than 100 billion yen into Seibu in 2005, leading to a bailout of the railway and hotel operator after it was delisted in the wake of a scandal centred on the falsification of financial reports.

The relationship began to sour around 2011 over the terms of Seibu’s planned public offering, expected to be worth several billion dollars.

Seibu President Takashi Goto has said the fund’s actions are hurting the company’s corporate value and hindering its plans to relist its stock on the Tokyo Stock Exchange. Cerberus believes Seibu must bolster governance and improve earnings performance first to ensure it gets a fair value for its shares.