Sapporo to reject Steel’s buyout


Sapporo Holdings Ltd. said Monday its panel judged that U.S. hedge fund Steel Partners Japan’s proposal to take over the nation’s third-largest brewery could seriously harm its shareholders’ interests.

The recommendation by the panel is likely to lead Sapporo to formally turn down the buyout proposal by Steel Partners Japan Strategic Fund, the U.S. fund’s Japan unit.

“The buyout is highly likely to hurt Sapporo Holdings’ corporate value and it would be extremely harmful to the common interests of its shareholders,” the panel said in a statement.

The panel a lawyer and two other outside experts sent the opinion to Sapporo earlier in the day after the brewery asked for advice on Jan. 8 about whether it should launch takeover defenses against Steel’s buyout attempt.

Steel Partners is Sapporo’s largest shareholder, with 17.52 percent of outstanding shares.

The panel did not make a judgment regarding whether Steel Partners’ buyout attempt is “abusive,” saying that is not necessarily a factor in deciding whether the beer maker should launch takeover defenses.

But one panel member later said Sapporo now has in effect the green light to take steps to block a takeover attempt.

“Sapporo is now justified in launching defense measures if Steel Partners makes a move to buy out Sapporo,” Shunko Muto, the lawyer on the panel, told a news conference.

The Supreme Court last August dismissed an appeal by Steel Partners against a lower court decision in favor of Bull-Dog Sauce Co., a Japanese condiments maker that carried out a poison pill takeover defense against the U.S. fund’s buyout bid.

The panel also said Steel did not provide enough information on how it wants to run Sapporo and turn around Sapporo’s business after the proposed acquisition.

Muto said he believed Steel might sell ¥600 billion worth of Sapporo’s real estate in Ebisu, Meguro Ward, where its headquarters is located, to improve profits.

“Such action would hurt its corporate value and even make it hard for the brewer to get on with its business,” he said.

On Feb. 15, 2007, Steel Partners said that it would launch a tender offer to raise its stake in Sapporo to 66.6 percent if Sapporo’s board of directors approved the move. The brewer has asked Steel Partners to answer questions on its plans.

When Sapporo President Takao Murakami and Warren Lichtenstein, managing partner of the fund, met last month, Steel Partners asked Sapporo to present conditions under which Sapporo would accept a takeover bid by the U.S. fund, according to the letter later made public by Steel Partners.

Sapporo will make a decision on the proposal by March 5, based on the panel’s advice.

Steel Partners, which recently failed to take over Bull-Dog through a tender offer, has invested in a wide range of Japanese firms, including confectioner Ezaki Glico Co. and Nissin Food Products Co., as well as Sapporo Holdings.

Information from Kyodo added