Triangle-Merger Delay ? Minor Bump on a Major Road

Robert Alan Feldman of Morgan Stangley (Tokyo) has some interesting thoughts on the whole Livedoor/FujiTV spectacle. This is the first time that I’ve actually touched upon this topic, even though it is a daily discussion topic for Japanese people everywhere.

Basically the short story is that there’s a 32-year old Internet entrepreneur, Horie, who’s CEO of Livedoor, an Internet portal. He’s raised a lot of money with Lehman Brothers and is trying to do a hostile takeover of FujiTV, one of the main TV companies in Japan.

Because Japan is new to hostile takeovers, it is a big discussion issue. In general, I don’t think too much of Horie and Livedoor itself, but I do think that hostile takeovers should become more common in Japan- if only to clear out bad management and moribund businesses.

The boardroom and the population are way ahead of the politicians. At recent seminars and discussions in Tokyo, the debate on the Livedoor/Fuji TV battle has shown many nuances. Boardroom people have limited sympathy for either side, in view of the tactics used and the histories of the companies involved. Moreover, the boardroom understands that (1) corporate law changes will create many more opportunities for Japanese companies than for foreign companies, (2) the public largely supports Livedoor — not because of the proposed deal itself but because it sees a crying need for aggressive agents of change. One CEO of a major company said to me, “Two-thirds of the boardroom wants Fuji TV to win (despite reservations about their methods), but two-thirds of the population wants Livedoor to win. We cannot have strong companies if the people do not support us.”



I do think it is very telling that the Japanese people want Livedoor to win- they’ve invested heavily in Livedoor and it would bolster the stock. Whether it is the right thing to do for Livedoor, I think this debate is healthy for Japan. There should be more hostile takeovers in Japan.

Triangle-Merger Delay ? Minor Bump on a Major Road

3 comments on “Triangle-Merger Delay ? Minor Bump on a Major Road
  1. Christian Gates says:

    Your readers should keep in mind what a “hostile” takeover means. It sounds like some nasty 1980s M&A technique, financed by a shady “junk” bond deal and somehow used to bilk kindly old ladies out of their savings, or “destroy” some industrial company, so a handful of Gordon Gecko types can afford more hair gel or whatever.
    In fact, all it means is that a bid for a company’s stock, unsolicited or otherwise, is opposed by the board of directors. Ultimately, though, it’s the shareholders who have to decide if they’d rather accept the takeover price, which is likely higher than the pre-announcement share price, or hold their shares in hopes that in the future the share price will rise high enough above the proposed takeover price to justify their holding of the stock.
    In other words, it potentially raises a difference of opinion between ownership and management – a very natural business condition – and allows ownership to evaluate their holdings with very real current options. Ownership isn’t forced to sell (exception: minority ownership, if most decide to sell, will usually be forced to accept either cash or stock in the new entity).
    The term “hostile” takeover is really fraught with unfortunate and misleading connotations, though, just like so-called “junk” bonds and other populist phrases for events or securities used in finance that aren’t well understood by the general public.
    cdg

  2. The whole LiveDoor/Nippon Broadcasting/Fuji TV embroglio is one of the most interesting stories around. It touches on so many business topics: shareholder rights, commercial law, stock exchange rules, employee cultures, etc., etc. I found reading up on it 1. a great way to refresh my Japanese and 2. a daily lesson on corporate finance. Ultimately, it led me to start my own blog on Japanese business (if you know of other business-centric blogs, please share?–thanks).
    Incidentally, Yomiuri has an excellent resource for those interested in the story:
    http://www.yomiuri.co.jp/atmoney/special/84/

  3. The whole LiveDoor/Nippon Broadcasting/Fuji TV embroglio is one of the most interesting stories around. It touches on so many business topics: shareholder rights, commercial law, stock exchange rules, employee cultures, etc., etc. I found reading up on it 1. a great way to refresh my Japanese and 2. a daily lesson on corporate finance. Ultimately, it led me to start my own blog on Japanese business (if you know of other business-centric blogs, please share?–thanks).
    Incidentally, Yomiuri has a great resource for those interested in this story:
    http://www.yomiuri.co.jp/atmoney/special/84/