Leading online shopping mall operator Rakuten Inc. said Thursday it has told Tokyo Broadcasting System Inc. it aims to raise its equity stake in the broadcaster to “a little more than” 20.00 percent from the current 19.86 percent and send Rakuten President Hiroshi Mikitani to the TBS executive board.
The announcement by Rakuten, which had a merger proposal rejected by TBS in October 2005, is likely to ignite a takeover battle, although Rakuten said the latest move is not hostile.
No comments were immediately available from TBS, the third-largest domestic broadcaster.
To emphasize the friendly nature of the move, Rakuten followed procedures stated in TBS’s package of antitakeover measures, submitting a notice of its intentions to the broadcaster, Rakuten said.
In its notice, Rakuten proposed that TBS accept Mikitani and Muneaki Masuda, president of Culture Convenience Club Co. and an external director of Rakuten, as outside members of the broadcaster’s board.
Rakuten also said it will solicit proxies from TBS shareholders in support of its proposals, which also include one calling on the broadcaster to amend its articles of incorporation in order to require antitakeover measures to receive approval from more than two-thirds of shareholders attending a general meeting.
Rakuten said it will purchase additional TBS shares on and off the market after due process on the broadcaster’s part, including an examination of the share purchase plan and preparations to convene a general shareholders’ meeting if it is deemed necessary by the TBS board under its antitakeover package.
Share purchase prices will be determined based on market conditions and negotiations with sellers, Rakuten said.
If Rakuten succeeds in the planned additional share acquisition, TBS will become Rakuten’s equity-valued affiliate, which means the broadcaster’s earnings will be incorporated into Rakuten’s income in proportion to the size of its equity investment.
Rakuten said in its notice that it wants to “provide new services by integrating the merits of broadcasting and use of the Internet.” Rakuten also said it would “respect TBS’ management policy.”
Rakuten also cited a recent spate of scandals involving major TV broadcasters, most notably Kansai Telecasting Corp.’s prime-time program that used fabricated data on the positive effects of a “natto” (fermented soybean) diet. Rakuten said it would propose, if necessary, establishment of an impartial, third-party body to keep tabs on TBS.
Rakuten plans to bring up these issues at the TBS shareholders’ meeting in June.
In October 2005, Rakuten pressed TBS to merge with the online company after acquiring a large volume of the broadcaster’s shares, stressing the need to achieve a fusion of broadcasting and Internet services. But Rakuten’s abrupt proposal met with opposition from TBS.
After Rakuten’s unsuccessful attempt to merge with TBS, they signed a memorandum of understanding on Nov. 30, 2005, under which a set of conditions were stipulated for holding business alliance talks.
One of the key conditions was that Rakuten put about half of its roughly 19 percent stake in TBS under the management of a trust bank and freeze voting rights in the broadcaster.
The trust contract with Mizuho Trust & Banking Co. expired Feb. 28 and Rakuten decided to resume control of its entire TBS stake as its biggest shareholder.
In November 2005, TBS announce a new package of defense measures featuring a poison pill strategy to discourage a hostile takeover by issuing equity warrants to existing shareholders to dilute the unsolicited acquirer’s ownership ratio.
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