DEAL STILL POSSIBLE DESPITE BICKERING

Hankyu’s bid for Hanshin puts market’s eyes on Murakami

by Tetsushi Kajimoto

Hankyu Holdings Inc.’s tender offer for Hanshin Electric Railway Co. has the market waiting to see what Hanshin’s biggest shareholder, the Murakami fund, will do next.

When Hanshin shareholders meet June 29, Murakami could take over the Osaka-based railway if rival Hankyu Corp.’s holding company fails to complete its tender by June 19. And the clock is ticking.

The Murakami fund, headed by shareholder activist Yoshiaki Murakami, has about 47 percent of Hanshin’s stock. Hankyu is offering 930 yen per share, but Murakami reportedly seeks around 1,000 yen. The price meanwhile keeps rising on the Tokyo Stock Exchange, closing Wednesday at 945 yen.

Mergers and acquisitions pioneer Ikuo Yasuda, chairman and CEO of Pinnacle Inc., said the two will reach a deal eventually as the gap between Hankyu’s offer and the fund’s demand has narrowed.

A successful tender will be a win-win situation for Hankyu and Murakami, while the tussle between them has made many Japanese firms aware of the need to enhance their corporate value to meet shareholders’ expectations, Yasuda said in an interview with The Japan Times.

“Murakami has turned enough of a profit,” Yasuda said. “I think the problem (he) is concerned with is the condition of accepting (an offer) below the market price.”

The Murakami fund “is said to have acquired its Hanshin shares at an average cost of 640 yen (since last fall), and so would make about 55 billion yen in capital gains if (it) sold at 930 yen,” Yasuda said.

Since Hanshin shares closed at 945 yen Wednesday, the two sides should be able to settle on a price somewhere between 930 yen and 950 yen. Hankyu can revise its offer, he said.

It is the Murakami fund’s policy not to sell for less than market price, Yasuda added.

The tender will fall through if Hankyu, which has pledged to buy not only Murakami’s shares but all stock sold by Hanshin shareholders, fails to buy more than 189.7 million shares, or 45 percent, of the railway’s outstanding shares.

The tender will cost Hankyu at least 176.4 billion yen and could reach 392.1 billion yen if it acquires all 421 million or so outstanding shares.

Still, Yasuda said Hanshin is a good buy for Hankyu, which is saddled with more than 900 billion yen in liabilities and lacks the financial capacity to increase borrowing.

Hanshin’s real estate, particularly prime commercial properties in Osaka, would improve Hankyu’s financial condition and boost its borrowing power, Yasuda said, noting Hankyu would benefit from the synergies from tieups of the two firms’ railway and real estate businesses.

“Murakami may win in terms of money this time, but the fund may pay a price in terms of public image,” Yasuda said. “Another lesson is Hanshin management let down its guard, allowing (Murakami) to acquire over 40 percent of its shares unawares as it wasn’t in the habit of protecting against (takeovers).”