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Macquarie has a 19.9% stake in Japan Airport Terminal; will it be allowed to buy more?

Is Japan about to face a test? Earlier this week, US Assistant Treasury Secretary Clay Lowery told the Foreign Correspondent’s Club of Japan that “There are concerns among investors that Japan may not be fully committed to attracting FDI (foreign direct investment). It is therefore important Japan sends a clear signal that it is open for investments.”

Just a month ago, European Union Trade Commissioner Peter Mandelson, while on a visit to Japan, declared it to be the most closed developed economy to foreign investors.

Both are most likely thinking of the recent order issued by the Ministry of Economy, Trade and Industry against the UK-based Children’s investment fund. The government decided that allowing TCI to double its share in J-Power from 10 to 20 percent would endanger national security. TCI is already the largest single shareholder in J-Power.

Now, we have learned via the Nikkei that Japan Airport Terminal, the company that operates Tokyo’s Haneda Airport, is 31.5% held by foreign investors. Eight months ago, that figure stood at 24.7%.

According to the paper, Macquarie Airports Ltd, a unit of Macquarie Bank, is now JAT’s top shareholder, having amassed 19.9% of the company since it began buying shares last July. Japan Airport Terminal intends to extend the takeover defenses that it adopted last year.

Back in February, the government decided against passing a law to place a limit on foreign ownership of Japanese airports to less than one third. Although this was seen in some circles as a positive sign, it really doesn’t matter now that a national security law has been invoked to stop TCI from buying shares in J-Power. The question now is whether the Japanese government will continue to issue orders against foreign investors in such cases, and if it does - what potential risks could the financial markets face as a consequence?

Steel Partners cuts its bid price for Bull-Dog; Shares trading lower

Yes, Steel Partners is still going after Bull-Dog. No, there is no longer a premium attached to the bid price. Steel Partners has cut its bid price to 425 yen per share, and the issue is trading at 522 right now. Yesterday, trading on Bull-Dog was halted after the share price fell by its daily limit.

Steel Partners has extended the bidding period for Bull-Dog shares to August 10.

Tokyo High Court Upholds Decision Against Steel Partners

On June 28, the Tokyo High Court rejected a petition from Steel Partners requesting that an injunction be placed against the Bull Dog sauce company, in order to bar it from issuing equity warrants as part of a ‘poison pill’ plan intended to dilute Steel Partners’ holdings in the company.

Steel Partners appealed that ruling immediately, and this afternoon it was announced that the court sided once again with Bull Dog. Steel Partners has still not withdrawn its takeover bid.

Tokyo High Court Rejects Injunction Against Bull Dog

Earlier this afternoon, the Tokyo High Court handed down its ruling on the injuction that Steel Partners had saught against Bull Dog’s proposed ‘poison pill’ plan for diluting the hedge fund’s holdings in the sauce maker, and it ruled on the side of Bull Dog.

Reuters explains the logic behind the ruling:

The Tokyo District Court ruled that the issue of share warrants does not violate the principle of shareholder equality as long as the economic interest of shareholders is maintained.

Lawyers have said Japanese corporate law does not protect the size of a stake relative to other shareholders’ stakes, just its monetary value.

The logic there may seem fuzzy, but it should be kept in mind that judges in Japan rule on the letter of the law, and almost never inject their own interpretation.

Warren Lichtenstein, the manager of Steel Partners, had this to say:

We believe the company’s scheme, if allowed to be carried out, would be detrimental to the legal framework of corporate Japan. (It) would weaken international faith in the integrity of the Japanese capital markets, and would not only deter investment in Japanese companies but also undermine Japan’s efforts to become a global centre.

On the one hand, he could be very correct. On the other, if firms start to feel safe from the threat of hostile takeover, we may see a reversal in the trend of companies deciding not to go public with their shares due to fears of unsolicited takeover bids.

Steel Partners plans to appeal the ruling.

Fear in the air: Cross-shareholdings up, firms afraid to go public

Let’s talk about whether or not people here in Japan are listening to Warren Lichtenstein, the manager of the Steel Partners Japan Strategic Fund. Back on June 12, he was quoted in Bloomberg as saying, “After 15 years of recession, Japan is now waking to a completely different world. As long as we can find interesting opportunities to invest our capital to get good risk-adjusted returns, we will do it more and more.”

That certainly got some attention. So much attention, in fact, that we’re starting to see headlines like this: Equity Financing Tumbles As Firms Worry About Unsolicited Takeovers and Cross-Shareholdings Rose For 1st Time In FY06.

No doubt, these trends were in place well before Mr Lichtenstein spoke in Tokyo two weeks ago, but they are (at least in part) a reaction to what Steel Partners has been doing in Japan. Major banks have reportedly begun increasing their cross-holdings, perhaps in an attempt to secure that lenders keep coming to them.

To be fair, fear of being the target of an unsolicited takeover attempt is not the only reason that the amount of funds raised through IPOs is expected to fall 70% in the first six months of 2007. The Nikkei also attributes the drop to, “The prospects for higher interest rates, which is prompting [companies] to issue straight bonds earlier than initially planned.”

But which one got the headline?

Another thing Mr Lichtenstein said while in Tokyo:

Read more

Warren Lichtenstein on the Bull Dog Vote

After this afternoon’s vote at the Bull Dog shareholders’ meeting, Steel Partners Japan Strategic Fund manager Warren Lichtenstein made the following comments in a written statement issued by the company:

We are disappointed that the proposed “SARs” (stock acquisition rights) have been approved. We believe that this anti-takeover measure will materially harm the Company’s value and question why the Board is using Company assets - that could otherwise be used for the Company’s growth - to oppose a bid by a supportive, long-term shareholder to acquire more shares in the Company. Such a scheme, if allowed to be carried out, would be detrimental to the legal framework of corporate Japan, would weaken international faith in the integrity of the Japanese capital markets and could deter investment in Japanese companies and Japan’s national economy as a whole.

Now all eyes turn to the Tokyo District Court, and whether or not it decides that Bull Dog’s plans are actually legal.

Bull Dog Shareholders Approve Anti-Takeover Measures

Earlier this afternoon, the shareholders of Bull Dog voted to approve anti-takeover measures that had been proposed by the company’s senior management in order to thwart an unwanted takeover bid by U.S. hedge fund Steel Partners.

Steel Partners has asked the Tokyo District Court to issue an injunction against Steel Partners, on the grounds that the anti-takeover plan would violate the principle that all shareholders should be treated equally. Bull-Dog’s plan involves issuing 3 equity warrants per share and not allowing Steel Partners to exercise its warrants. Instead, by buying them back for 396 yen per warrant, Bull Dog would reduce Steel Partner’s holding from about 10 percent to less than 3 percent.

A decision from the Tokyo District Court is expected by the end of this week. If the court decides that Bull Dog can proceed with its anti-takeover plan, Steel Partners will have until July 4 to give up its tender offer. If that does not happen, Bull Dog will issue the equity warrants on July 11.

Although shareholders supported Bull Dog’s management with the vote, management came under fire from several participants. One man pointed out the obvious lack in risk management skills and asserted that the company could have paid higher dividends to investors instead of spending money implementing anti-takeover measures that should have already been in place.

One shareholder, in a show of support for the company and an attempt to get in a tired old dig at foreigners, said that Steel Partners’ aggressive move to take over the company was akin to walking into a house with shoes on.

It’s difficult to evaluate what sort of precedent this may set until the court returns its verdict, but the shareholder sentiment is not encouraging.

Does Bull Dog have enough votes to get its anti-takeover measures?

Bull Dog, the sauce company that is currently the target of an unsolicited takeover bid from Steel Partners, is holding its annual shareholders meeting on Sunday. At the meeting, Bull Dog’s shareholders will vote on whether or not to adopt a ‘poison pill’ anti-takeover measure in an attempt to thwart Steel Partner’s bid.

The Nikkei is reporting that Bull Dog has secured the 2/3 votes necessary to approve the measures, including votes from corporate shareholders such as Toppan Printing.

The Nikkei explains the plan quite simply:

Upon shareholder approval, Bull-Dog would issue the warrants to all stockholders. But the warrants to Steel Partners would not be converted into common stock, and cash would be paid instead. This would reduce the U.S. fund’s stake to around 3% from the current 10% or so.

Steel Partners has requested that the Tokyo District Court issue a temporary injunction to prevent Bull-Dog from issuing the equity warrants, claiming they go against the principle that all shareholders should be treated equally.

Steel Partners all over the news: METI speaks up

As we discussed in the most recent edition of BizCast Japan, Steel Partners Japan President Warren Lichtenstein was in Japan earlier this week. In this humble observer’s opinion, he simply shined in front of the cameras before heading off to meet with the senior management of some of the companies that Steel Partners is investing in/trying to take over.

Then things didn’t go so well. During an hour-long meeting in Tokyo on Wednesday, Lichtenstein was quizzed by Bull-Dog President Shoko Ikeda about the intentions behind the fund’s tender offer and also grilled on what would be its business plan for the company should the offer be successful. According to reports, Lichtenstein responded by “asking Ikeda what tender offer price the Japanese firm would be willing to accept.”

After that meeting, Steel Partners filed an injunction to stop Bull-Dog from issuing equity warrants, which would dilute Steel Partners’ share in the company and make a takeover much more difficult. Steel Partners holds that such a move may be illegal, and at his press conference, Lichtenstein stressed that such steps have not been taken before in Japan, and that they are being considered because companies do not understand what Steel Partners is trying to do.

Steel Partners fought back by saying that its “poison pill” measures are not only legal, but appropriate in such a situation.

Then, on Friday, a METI Vice Minister, Takao Kitabata, criticized the investment tactics employed by Steel Partners, claiming that none of its takeover proposals are helping to increase corporate values, and that “poison pill” tactics are fully legal.

We think Steel Partners is going to stay in the news for some time to come, and those companies who adopt poison pill strategies are going to eventually regret it. Or not, given the average age of their senior management.

Take That, Steel Partners! Bull-Dog Shows its Growl

According to a Kyodo News report, 100% of Bull-Dog employees have signed a document “expressing objections” against the unsolicited takeover bid by Steel Partners, who is the largest single shareholder in the sauce company.

Can this get any better, or more strange? According to the report, all 250 employees of Bull-Dog signed a document stating that the takeover “would seriously undercut the trustful relationship we have built up for years with our customers as well as that between employees and the management.”

It does get better. In a written statement, Bull-Dog actually said: “[We have] asked the Tokyo District Court to appoint an examiner under Article 308 of the Corporate Law to investigate procedures we have taken to convene this shareholders’ meeting as well as methods the shareholders will use to pass resolutions…to ensure that no one can accuse our firm of breaking laws regarding the procedures and vote-taking methods.”

I, for one, never believed that Saddam Hussein was actually elected unanimously. Call me cynical.

Bull-Dog shares fell 41 yen in Monday trading.

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