ABSTRACT
Until the 1990s, hostile takeovers in Japan were rare and not considered a significant issue in institutions with stable shareholding, main bank system and relational contracting in general. However, things changed significantly from the Nippon Broadcasting System case, probably the most widely discussed case of hostile takeover in Japan.
Nippon Broadcasting System Inc. (NBS), the target, is a radio broadcaster established in 1954 in Japan. Livedoor Co., the acquirer, is an internet services provider. However, there is a third main player, Fuji Television Inc. (Fuji TV), a subsidiary of NBS and both of them are parts of the Fuji-Sankei group.
This case is rather extraordinary and valuable for several reasons. Firstly, it clearly highlights the lack of regulation in the field of takeovers in Japan (rules on defensive measures, TOB legislation, and lack of judicial standards). Secondly, it shows how big Japanese companies can also become the targets of takeovers. Thirdly, it reveals the inefficiency of the old structural barriers at opposing an unsolicited bid. Fourthly, it demonstrates how the Japanese business culture has moved from being stakeholder-oriented to being shareholder-oriented. Fifthly, it represents a test of the availability of a wide range of takeover defenses, especially the poison pill. Sixthly, it provides a chance for two Japanese courts (Tokyo District Court and Tokyo High Court) to fix new judicial standards. And finally, it symbolizes the convergence of the Japanese system to a new model of corporate control, based on the market of hostile takeovers, the model of the market for corporate control.
OVERVIEW OF COMPANIES
Fuji-Sankei Communications Group comprises around 100 companies concerned with television, newspaper, radio, book and magazine publishing, music and video production, direct marketing, property and museum management. Both Nippon Broadcasting and Fuji TV are core members of the Fuji-Sankei group.
Nippon Broadcasting System is a dominant player in Japan's radio industry, with 37 stations, and one of the world's largest radio broadcasting networks. Its major arm is the National Radio Network; other units include the Nippon Cultural Broadcasting Group.
Fuji Television has 28 domestic stations, 20 overseas offices and a 30% stake in interactive broadcasting venture Satellite Service. It claims to broadcast to around 98% of the Japanese population. Nippon Broadcasting has long been the largest shareholder in Fuji Television.
STORY LINES
The first crucial action
In May of the year 2004, Mr. Murakami, the president of MAC which is the largest shareholder in NBS with a 19.5% stake, announced to seek a seat on the board of NBS during the following shareholder meeting. The capital structural problem, claimed to be fixed by having Murakami in the board in his proposal, is that Fuji TV is a subsidiary of NBS (NBS owned a stake of 22.5% in Fuji TV) despite the market capitalization of NBS and Fuji TV is 180.4 billion and 642.2 billion yen respectively. Therefore, Murakami proposed to turn the parent company into a subsidiary of Fuji TV or to integrate the management of both in order to create a joint holding company.
However, the directors of Fuji TV rejected this proposal and besides, in September 2004, took actions to buy a large quantity of NBS shares, raising its stake from 0.03% to 12.4%.
The second crucial action
Afterwards, on Jan 17, 2005, Fuji TV announced to launch a tender offer (from Jan 18 to Feb 21) to buy NBS shares in order to raise its stake to over 50% at 5,950 yen per share, a 21% premium.
Livedoor’s bid
During the period of the Fuji TV tender offer, on Feb 8, 2005, taking advantages of the lack of adequate TOB rules, Livedoor launched a bid to secretly acquire 35% of NBS’s shares. On Feb 7, 2005, Livedoor purchased 5.4% stake from the open market. In the next day, Livedoor purchased another 29.6% stake through ‘off-hours deals on Tostnet (a system for trading shares outside the normal working hours). Without informing any shareholders, overnight Livedoor became the largest holder of NBS.
In order to finance the purchase of stake in NBS, Livedoor entered into a contract with Lehman Brothers Japan Inc. to sell its convertible bond worth 80 billion yen.
On Feb 9, Livedoor’s president, Horie, announced that he hoped to acquire a majority stake in NBS in order to use its internet business in conjunction with the radio and TV stations, as well as a record label under the Fuji-Sankei group.
Reaction to Livedoor’s bid
NBS’s president, Akinobu Kamebuchi, told that "If Livedoor becomes our parent, our corporate value will be gravely damaged".