TOKOROZAWA, Japan-Cerberus Capital Management, the U.S. private equity giant embroiled in a public battle to revamp management at Japan’s Seibu Holdings, failed Tuesday to push through a bid to appoint new directors at the struggling conglomerate, the latest setback by foreign investors to shake up corporate Japan.
The battle’s outcome had been seen as a test of whether the lofty ambitions of attracting foreign capital, set by Prime Minister Shinzo Abe as part of his driveto revive Japan’s economy, would translate to more openness among Japanese companies to work with investors overseas.
Cerberus paid more than 100 billion yen, or $1.07 billion at the current exchange rate, to lead a bailout of Seibu in 2007 following an accounting scandal, which led to the delisting of its shares. But Cerberus, still Seibu’s biggest shareholder, accused Seibu management of cutting off discussions as it moved to relist on the Tokyo Stock Exchange this year.
Cerberus, based in New York, has since urged Seibu, which operates Japanese railroads and hotels, to improve corporate governance, as well as profitability, to gain maximum value for shareholders in any relisting.
In March, Cerberus began an unsolicited tender offer to raise its stake in Seibu to 44.7 percent from 32! .4 percent, to win stronger influence over Seibu’s management. But the bid fell short and Cerberus gained only a 35.48 percent stake, thanks to a public campaign by Seibu against the offer, in which it claimed Cerberus had threatened to shut down local train lines and sell off Seibu’s baseball team â€" moves denied by Cerberus.
Cerberus’s latest proposal, presented at Seibu’s annual shareholders meeting outside Tokyo on Tuesday, would have increased Cerberus’s influence by appointing a new slate of directors to Seibu’s board, including former U.S. Vice President Dan Quayle and former U.S. Treasury Secretary John Snow.“Our overriding goal is to make Seibu an exemplar of corporate governance, transparency and business operations,†Louis Forster, chairman of Cerberus Asia Pacific Advisors, said last week before the showdown.
On Tuesday, Yoshiteru Suzuki, the senior managing director of Cerberus Japan, repeated the company’s proposal in at the shareholders’ meeting, urging Seibu’s usually docile investors to support the bid.
“We want to seek to make Seibu Holdings the type of success story that will spur more foreign investment to Japan,†Mr. Suzuki said. “Please listen to the management and make up your own mind.â€
“This company is yours,†he added, to a smattering of applause from the shareholders. Some investors took the cue to speak out against Seibu.
“How can you take money from us shareholders and Cerberus, then tell us to stay silent?†one particularly animated attendee asked.
But Cerberus’s proposal was voted down, with the majority of shareholders p! resent vo! ting against, according to a Seibu tally. The result was met with applause from the floor.
“We believe Cerberus is trying to exert undue influence over Seibu’s board, and its interference will damage the long-term value of the company,†said Seibu’s chief executive, Takashi Goto.
The bid by Cerberus to revamp Seibu’s management is the latest attempt by foreign investors to make their mark and bring change to Japanese corporate governance, which critics have long said put the rights of shareholders behind the whims of management, to the detriment of a company’s value.
Another U.S. company, the hedge fund Third Point, has pressed Sony to spin off part of its entertainment arm to raise capital to rebuild the company’s electronics business. Third Point, led by the U.S. billionaire investor Daniel Loeb, has also asked for a seat n Sony’s board. Few analysts expect Sony to accept the proposal.
