The tug of war between Hanshin Electric Railway Co. and its largest shareholder, the Murakami fund, is expected to heat up this week over the selection of Hanshin board members, with a Murakami candidate for the board demanding an explanation from Hanshin for its objection to his candidacy.

Eiji Tamai, who has been an outside board member of the Osaka-based railway since 1998, told reporters late Sunday he wants to meet with Hanshin President Kyoji Nishikawa soon to hear directly from him the reason for the objection.

Tamai added that he will resign as an outside board member if he is definitely unwelcome.

Hanshin and the Murakami fund, which holds about 45 percent of the railway’s stock, have been at odds over ways to improve Hanshin’s corporate value and policies on its group businesses.

On May 2, the fund, led by outspoken financier Yoshiaki Murakami, called on Hanshin to accept its recommendations for nine board members.

The demand follows the late-April announcement by Hanshin and Hankyu Holdings, which owns Hankyu Corp., another railway based in Kansai, that the two firms have reached a basic merger accord.

The integration plan assumes Hankyu will purchase the Hanshin shares held by the Murakami fund, but Hankyu is still in tough negotiations over the share purchase.

While Hankyu is reportedly offering some 800 yen per share for the Hanshin stake, the Murakami fund is thought to be holding out for a better offer.

The fund’s push for seats on the Hanshin board is thus seen as a bluff to boost the price of its stake.

If Hankyu Holdings and the Murakami fund can strike a deal in time for Hankyu’s and Hanshin’s shareholders’ meetings, both scheduled for next month, the investment fund may drop its demand for board seats.

The board currently consists of 16 members and nine of them are up for re-election at a general meeting of shareholders June 29.

The fund has recommended Tamai, Murakami and seven others from its ranks for these posts.

Hanshin management immediately objected, saying the fund had changed its stance on investing in the company — from its earlier stated “pure investment” objective to seeking majority control of the board. It also said Tamai is on the side of the Murakami fund.

Tamai said Sunday, however, that that was a misunderstanding and that he is neutral.

In an apparent reference to the stalled negotiations, Shigetaka Sato, president of Keihan Electric Railway Co., a rival carrier in the Kansai region, said, “The issue should be settled from basic points, like what role the railway business should play in Osaka.”

Sato revealed that Hanshin asked Keihan late last year to purchase Hanshin shares from the Murakami fund. But the proposed deal fell through as talks failed to iron out differences over the purchase price, he said.

Sato said he hopes Hanshin and Hankyu Holdings will achieve their planned management integration now that they have reached a basic accord.

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