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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.

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…

All Shareholders not created equal: Tokyo High Court

Corporate law does not deny discrimination of some shareholders in an economic sense or in terms of voting rights fluctuations.

Tokyo High Court Presiding Judge Satoru Fujimura, in his ruling against Investment Fund Steel Partners last week.

The Hero of Bull Dog Sauce Company? President Shoko Ikeda

I cannot make this up. This morning, the following piece greeted me from the Nikkei. The article is an attempt to describe how Bull Dog President Shoko Ideka was the main factor in the firm’s being able to resist the takeover attempt by Steel Partners. Some selections:

The strong, level-headed leadership demonstrated by Bull-Dog Sauce Co. President Shoko Ikeda was a key factor in the firm’s successful rejection of a hostile takeover attempt by Steel Partners…

Ever since Steel Partners launched a tender offer for Bull-Dog stock on May 18, the battle has been a prolonged psychological war and test of will for Ikeda and the company’s employees — who often had to work late into the night. Ikeda, 63, was there with them every step of the way, sometimes offering beef-on-rice dishes, vegetable soup and other meals she cooked herself at the company’s headquarters. She carefully looked after the health of her staff, telling them they had to build up their strength and eat enough vegetables…

“She is not only a quick decision maker, but also demands more of herself than of others,” said an executive at a major food company…

One person close to Ikeda says her patience and ability to remain cool in difficult situations may come from her childhood in Yamagata Prefecture, where the winters are severe and students are often forced to wait outside in the cold for trains delayed by heavy snow.

Basically, she was lucky the courts ruled on her side, she’s some kind of supermom/CEO hybrid, and she developed her patience by waiting outside in the snow. Can’t wait for the book!

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.

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.

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.

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