• Home
• About/Contact
• Economic Reports
• Research
• Advertising

• Business
• Economics
• Reports
• Finance
• Marketing
• Politics
• Real Estate
• Services
• Retail
• Tech

Subscribe

Steel Partners Loses an Appeal; Bull-Dog Loses About $15 Million

Yes, the Steel Partners vs Bull-Dog Sauce saga is still in the news. Earlier today, the Supreme Court of Japan rejected Steel Partner’s appeal against previous rulings that backed up Bull Dog’s anti-takeover defense plans. The Supreme Court, which backed away from the extreme language used by the Tokyo High Court in its previous appeals ruling, stated that treating Steel Partners differently to other shareholders “does not necessarily go against principles of equality if the shareholders’ collective interest is threatened.”

Although the Supreme Court did not issue an opinion on whether or not Steel Partners’ actions made it an “abusive quirer,” as the Tokyo High Court had previously said, the ruling did state that Bull-Dog’s actions were justified, because, “The company merely did not have any rules in place beforehand, but this does not mean that measures to address such situations are not allowed.”

Thus, the shareholder vote stands. Perhaps this could be a show of shareholder power? We would love to know what Scott Callon of Ichigo Asset Management would have to say on this.

In the end, Bull-Dog (unsurprisingly) got the legal backup it so dearly paid for. Although the firm has left its sales projections for the current fiscal year unchanged at 17 billion yen, it has revised its earnings forecast down from a 500 million yen profit to a loss of 980 million yen.

About 2.3 billion yen was paid out to Steel Partners in order to dilute their share in the company. We will be eagerly waiting to see Bull-Dog’s final numbers for this fiscal year…

Goodwill Group showing anything but

With the recent news that Morgan Stanley has upped its stake in Goodwill Group to 13.62 percent and with UBS pushing its holdings in the company to 9.51 percent, it seemed as though the scandals surrounding Goodwill and its subsidiary, disgraced nursing care provider Comsn, might be about to become a thing of the past.

After all, elder care and temporary worker dispatch services are both huge growth industries in Japan. With over 30% of Japan’s workforce now working as contract employees, there’s bound to be more and more money in that game. And who ever made money without at least getting a few fingernails dirty?

But with a President like Masahiro Origuchi at the helm, you know another scandal is always just around the corner. This guy just can’t get enough of ripping off his own clients and cheating the system by exploiting the weak. First it was the elderly. Now it’s temporary workers.

It will be hitting the newspapers tomorrow that Goodwill group has been illegally deducting ‘data processing fees’ and ‘administration’ fees from the already low salaries of the temp workers that it dispatches to companies all over Japan.

Taking 200 to 250 yen a pop off of each paycheck may not seem like much, but it adds up when one sends thousands of unsuspecting employees off to work. These are people often just trying to get by, and the rise in the number of non-regular workers as a percentage of Japan’s workforce has been one of the strongest contributing factors to the continued erosion of Japan’s middle class and the financial inability of Japan’s families to afford more than one child.

Remember Noriko Hama on corporate social responsibility in Japan?

I will hold off on passing judgment on firms that have invested in the Goodwill Group until they have had a chance to divest and distance themselves from such business practices.

Mr Origuchi, was that money worth it? Was it worth it to take away some otoshidama here and there so you could have a new Ferrari, or whatever? I really hope so. I really hope you surround yourself with obsequious yes-men who at least pretend to respect you, because in reality, they don’t.

No one does.

Bull Dog’s deadline comes and goes; Steel Partners’ tender offer still on the table

The management of Bull Dog had set today as the deadline for Steel Partners to withdraw its tender offer or be subject to a poison pill scheme designed to reduce its holdings in the company from about 10 to about 3 percent, but Steel Partners has refused to budge. The hedge fund says it has no reason to give up on the takeover bid before a ruling on an appeal by the Tokyo District Court is handed down. Steel Partners is challenging the legality of Bull Dog’s plans, and has expressed confidence that the court will agree with the fund.

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.

Japan Law Blog: Where to sue in Japan

Have a problem with your business in Japan? Need to sue somebody? Just feel like suing somebody for the hey of it but don’t know where to bring the lawsuit? Don’t worry - the Japan Law Blog has the answers.

Thanks to Joe Jones for an another well-written post with the sort of insight on the inner workings of Japan that we rarely get to see.

More on Steel Partners, Sapporo and Hostile Takeovers in Japan

On March 30 we reported on the ‘Advance Warning System’ for takeovers that had been approved by the shareholders of Sapporo Breweries. After being reported by the major news media, the story hasn’t really picked up much in the way of analysis, which is surprising given its position within the current state of the Japanese economy - especially when the cover of last week’s edition of Newsweek Japan depicted the Japanese flag, with its red sun surrounded by various domestic brand logos, being sucked into a hole.

The headline to the featured story read 「ファンド嫌いで沈むニッポン」, or, “Nippon Sinking in Fund Phobia,” and showed a cartoon of an American businessman entertaining a range of global clients, while a nervous looking gentleman wearing a necktie with the Hinomaru emblazoned on it looks on from a distance.

The story is obviously on the minds of people in Japan. One blog that has picked up on it is the new Japan Law Blog, written by Mr Joe Jones, who puts an interesting legal angle on the whole Sapporo/Steel Partners case:

Steel Partners has already argued that the terms of the warning system are completely unreasonable and that the defenses available to the board will completely prevent any takeover bid against Sapporo. Of course, if Steel Partners has to go to court they will stand a good chance of losing their bid anyway, simply because of all the delay…The history of hostile takeovers in Japan is mostly marked by failures, and those failures have more to do with such business tactics than with legal issues.

I must say I agree here. I had an opportunity to have a conversation with someone who does Organizational Development consulting here in Tokyo, and this issue came up. We were in pretty clear agreement that the approach made by Steel Partners left us scratching our heads, not least because it seems to be a tried-and-true path to failure, and because the approach from “Rationality and Legality” isn’t much of a match for the “Barbarians at the Gates” play on emotions and insecurities that the board of directors never even tried to disguise.

Japan cracking down on illegal trade with North Korea

Following North Korea’s nuclear weapon test in July, Japan set up the world’s strictest sanctions against North Korea. They have not, however, deterred everyone from doing business with the hermit kingdom. Thanks to Trans-Pacific Radio for this writeup:

Want to trade with North Korea? Better decide how much it’s worth to you. The government is seeking to increase the maximum penalties for violating its sanctions against the Kingdom of Kim from a 500,000 yen fine to a year in prison, which would allow the thorough inspection of cargo. Thinking about lying on your Customs declaration? It could get you a fine of five million yen or five years in prison. Want to bring drugs or guns into the country? Seven years.

Copyright © 2006-2010 Japan Economy News

Privacy Policy | Disclaimer