Seibu Railway Co. said Wednesday its group has chosen to reconstruct itself under a holding company, deviating from an earlier plan for the railway to absorb other key group members.
The holding company will own Seibu Railway and a new firm emerging from a merger between Prince Hotels Inc. and Kokudo Corp., it said.
The new hotel and resort firm will absorb some hotels now run by Seibu Railway, while Makuhari Prince Hotel in the city of Chiba and the Yokohama Prince Hotel will be sold, it said.
Seibu Railway President Takashi Goto said the transition would be completed by March, when the fiscal year ends, pending approval at an extraordinary general shareholders’ meeting to be convened sometime this year. Goto is expected to become head of the holding firm.
He stressed that managerial responsibility could be better clarified through the holding company format.
“We received suggestions (for rehabilitation) from more than 20 parties, including foreign investment banks, and most supported the idea of a holding company,” Goto told reporters in Tokyo.
The separation of Seibu Railway and the hotel and resort company under the holding company will help specify their respective financial responsibilities and allow them to focus on their respective turfs, the company said.
This will also enable the hotel and resort company to form alliances more easily with firms outside the group to maximize its corporate value, Seibu Railway said.
Yoshiaki Tsutsumi, the group’s effective leader who has pleaded guilty to involvement in the falsification of Seibu Railway’s financial statements, may have a major equity stake in the holding company, which is expected to try to go public, they said.
After the group plunged into a crisis on Seibu Railway’s false financial statements and its delisting from the Tokyo Stock Exchange last year, its management reform panel, led by Taiheiyo Cement Corp. adviser Ken Moroi, has been considering rehabilitation options.
In its final report in March, the panel recommended that Seibu Railway absorb Prince Hotels and part of Kokudo for the group’s reconstruction. Kokudo has been the core of the group.
While the group tried to implement the recommendation, Seibu Railway shareholders criticized the plan for allowing Mizuho Corporate Bank as a major creditor bank to take the leadership in the group’s reconstruction.
They also complained that the absorption of financially weakened Kokudo and Prince Hotels would not be favorable for Seibu Railway. Kokudo and Prince Hotels were insolvent as of the end of March.
M&A Consulting Inc., an investment fund led by former bureaucrat Yoshiaki Murakami, and U.S. investment banks Goldman Sachs Group Inc. and Morgan Stanley & Co. have made offers to acquire Seibu Railway.
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