Capping a bruising takeover battle that had continued more than two months, Livedoor Co., an Internet service provider, and Fuji Television Network have reached a compromise agreement. Although the package may contain few surprises, the way in which the two companies fought for control of Nippon Broadcasting System has raised fundamental questions about the methods of corporate acquisition.
Under the deal, Fuji TV will purchase all of Livedoor’s holdings in radio network Nippon Broadcasting and make it a wholly owned subsidiary. In addition, Fuji will acquire a stake in Livedoor through a third-party allotment of new shares. It remains unclear, though, what kind of business alliance will be formed between the up-and-coming Internet portal operator and one of the nation’s biggest TV broadcasters.
The high-profile buyout drama has focused attention on questions that had gotten short shrift in the past. For example, whose interests should a corporation serve first? What is the real purpose of purchasing a corporation? Is it feasible to integrate Internet and broadcasting services?
There is little evidence that these issues have been fully discussed by the parties involved. It appears that the compromise was motivated more by a desire to avoid a mutually damaging “war of attrition.”
For Livedoor, the drama may have unfolded largely as expected, or more or less “according to script,” as its president, Mr. Takafumi Horie, put it. In fact, the company took the lead most of the time, playing an aggressive game of speculation that has now brought it several tens of billions of yen in new funds. At the same time, however, the 32-year-old entrepreneur may have lost something no less valuable.
Mr. Horie had publicly vowed to “enhance the corporate value of Nippon Broadcasting and seek the happiness of its employees.” Now, one must wonder what he was really up to. He had raised hopes of a synergistic integration between radio broadcasting and Internet use. In opting for a huge sum of “settlement money,” though, he appears to have relegated such an experiment to the back burner.
Mr. Horie has taken a dim view of journalism and the media in general, saying, in effect, that information is something that can be purchased. Those who put faith in the Internet tend to overestimate primary information transmitted by individuals. That is a dangerous tendency. To understand how dangerous, one only needs to look at the present state of Internet use.
The work of screening and refining primary information requires, in many cases, the existence of intermediary organizations of specialists capable of providing such services. In this sense, it is unlikely that the media will be absorbed by the Internet. In the United States, for example, major media groups are making wider use of the Net through acquisition of Net-related businesses.
It remains to be seen whether a Fuji-Livedoor alliance will take a similar course. The answer seems to depend on how far Fuji is willing to go in cooperating with Livedoor.
During the takeover battle, Fuji TV found itself largely on the defensive in its efforts to keep Nippon Broadcasting in its fold. In the process, Fuji took questionable steps, such as buying shares at a higher price than that of its own takeover bid. This must have been unacceptable to shareholders who had responded to the bid.
Fuji defended itself by stressing the public nature of broadcasting, but misleading statements from its executives — such as those suggesting that television was meant only for “entertainment” — made it vulnerable to attack from Mr. Horie.
A hostile takeover bid during off-hours trading could destroy the moral foundation of market trading. Methods used to raise funds in the Fuji-Livedoor battle were problematic. It may be necessary to establish more transparent rules for takeover bids, but it would be unwise to impose too tight restrictions on foreign investment in Japanese media organizations.
In a globalizing economy, transnational business alliances are unavoidable. Yet the American view that corporations belong to shareholders — a view supported by Livedoor defenders — needs to be taken with a grain of salt. To be sure, corporations are owned by shareholders, but they are maintained by executives and employees.
In a nutshell, a corporation is an organization of working people. As such, it cannot be traded like goods. Given Japan’s traditional corporate culture, it is not always wise to follow the financially oriented rules of American capitalism.
In a time of both misinformation and too much information, quality journalism is more crucial than ever.
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