Cerberus Fails in Seibu Shakeup, Decries Foreigner Snub

Cerberus Capital Management LP failed in its push for a management shakeup at Japan’s Seibu Holdings on Tuesday, prompting the U.S. private equity giant to hit out at the conglomerate for snubbing foreign investors, Reuters reported.

(Reuters) – Cerberus Capital Management LP failed in its push for a management shakeup at Japan’s Seibu Holdings on Tuesday, prompting the U.S. private equity giant to hit out at the conglomerate for snubbing foreign investors.

Shareholders voted down Cerberus’s bold bid to secure 9 of 15 seats on Seibu’s board, the latest in a raft public spats at the embattled property and railways firm which is poised to relist on the Tokyo Stock Exchange.

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

Seibu said on Tuesday it would push for the relisting to occur as soon as possible. Cerberus is widely expected sell a portion of its holdings when Seibu goes public again, but did not elaborate on its plans after the meeting.

The American fund, Seibu’s largest single investor, has demanded Seibu improve governance and earnings performance to ensure it gets a fair value for its shares.

“Seibu last year unilaterally told us that our capital agreement was no longer good. They had also rejected our request for conversation,” Louis Forster, senior managing director of Cerberus Management, said in a statement.

“That attitude is against the Japan’s latest growth initiative driven by Abenomics to bring more foreign investors,” according to the statement, read by president of Cerberus’ Japan unit Yoshiteru Suzuki.

Seibu defended its performance on Tuesday, saying it met the exchange’s standards in terms of corporate governance and financial strength.

Cerberus had proposed eight new directors, including former U.S. Vice President Dan Quayle and former U.S. Treasury Secretary John Snow. One Cerberus representative was voted to the board in Tuesday’s vote.

Seibu President Takashi Goto said if Cerberus’ proposal had been accepted, the company would be controlled by the American fund. “The more influence from Cerberus on Seibu’s management could hurt our corporate value in a long term,” he said.

The relationship between Goto and Cerberus broke down last year as the company prepared to relist that could have allowed Cerberus to cash out on some of its investment of more than $1 billion.

“We share the same objective with Cerberus, which is to relist our company,” Seibu’s Goto told reporters after the meeting on Tuesday.

“We will seek conversation with them.”

The American fund paid more than 100 billion yen ($1.06 billion) to lead a bailout of Seibu in 2007 after it was delisted in the wake of a scandal centred on the falsification of financial reports.

Cerberus in March launched an unsolicited bid to boost its stake in Seibu from 32.4 percent to 44.7 percent to exert additional leverage over Seibu management. The bid only allowed Cerberus to increase its stake to 35.48 percent.

That is a big enough margin to allow Cerberus to veto decisions at future shareholder meetings. But Seibu management retains support among other large investors, analysts said.

Cerberus has been in the process of cutting its exposure to Japan. Earlier this year Cerberus sold a controlling stake in a Tokyo-based Aozora Bank in the public market. It had invested more than 101 billion yen in the bank.

“I am sure everyone is wondering what Cerberus will do from now and what we will do is what we think is best for the interest of all the stakeholders,” Forster told reporters after the meeting, without elaborating.