Cerberus To Increase Its Holdings in Seibu Against Seibu's Opposition

Early last month, Cerberus Capital Management announced a tender offer to raise its stake in Seibu Holdings Inc. to more than one-third, which would allow the U.S. fund to veto major board proposals at the railway and hotel operator's upcoming shareholders meeting.

Cerberus currently owns slightly more than 32% of Seibu. The tender offer, announced March 11, stands to acquire additional 4% to raise the fund's stake to 36.44%. Now the US fund plans to lift the purchase target to around 10%.

The offer runs from March 12 through May 17, with the offer price set at JPY 1,400 per share. That represents a roughly 190% premium over Seibu's closing price of 485 yen in December 2004, when Seibu Railway, its core subsidiary, was taken off the TSE. To acquire additional 10% at JPY 1,400 per share, Cerberus will be spending JPY 48 billion yen ($500 million). 

Seibu remains opposed to the move, and has garnered support from Mizuho Corporate Bank and some other large shareholders. 

Cerberus and Seibu have been under dispute over Seibu's plan to relist on the Tokyo Stock Exchange. 

Seibu was delisted in 2004 for falsifying financial statements. Seibu filed a relisting application with the TSE by last October, but no action has been taken due to disagreements with Cerberus over the timing and pricing of the initial public offering.

It was also reported that Cerberus intends to propose 8 new board members, including current chairman and former U.S. vice president Dan Quayle, and former U.S. Treasury Secretary John W. Snow, also a Cerberus senior executive, in addition to Hirofumi Gomi, a former commissioner of the Financial Services Agency; Masaharu Ikuta, previously head of what is now Japan Post Holdings Co.; and Yuji Shirakawa, a director at Aozora Bank.

Although Seibu is unlisted, it is owned by many investors. As a result, the financial instruments and exchange law requires Cerberus to use a tender offer to increase its stake above one-third.

The acquisition may result in the first major hostile TOB in the history of Japanese private equity.