Seiko Corp. on Monday confirmed news reports that it is considering selling part of its equity stake in Seiko Epson Corp. by the end of this month.
“We’ve started considering selling part of the Seiko Epson shares we hold, depending on relevant developments,” the precision instrument maker said.
The developments include the company’s earnings forecast for the current fiscal year and the yearend stockholders’ capital that “is in a situation of being greatly affected by the trend of prices of our holdings of bank stocks,” Seiko said.
A major economic daily reported in its Monday morning edition that Seiko is considering the partial sale to avoid an otherwise inevitable negative net worth in its group business in the 2001 business year.
Seiko holds 10 million shares, or about 6 percent of the outstanding shares, of Seiko Epson, an electronic device manufacturer that belongs to the Seiko group, according to the Nihon Keizai Shimbun.
Seiko Epson’s theoretical stock price is about 4,600 yen per share, based on its earnings per share and the average price earnings ratio for listed precision instrument makers in Japan, the daily said.
Seiko acquired the shares at about 1,200 yen each, according to the daily, giving the company latent profits of about 35 billion yen in the Seiko Epson shares.
Although the number of shares to be sold and the sales price have yet to be determined, Seiko is now in talks with Seiko Epson’s subsidiaries and affiliates to sell the shares to them, it added.
The daily also said Seiko is likely to incorporate part of the sales profit in its shareholders’ equity.
Seiko will be forced to write off about 10 billion yen in appraisal losses in shareholdings, due partly to the sharp decline in the stock price of Mizuho Holdings Inc., the holding company of Dai-Ichi Kangyo Bank, Fuji Bank and Industrial Bank of Japan, the daily said.
Without the sale of Seiko Epson shares, Seiko may have to report a negative net worth of several billion yen at the end of this fiscal year, it added.
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