TOKYO — Japan has a newly minted mini-Murdoch — a young media mogul whose interests include film, TV, radio and publishing.
Entrepreneur Takafumi Horie, the 32-year-old owner of Japan’s fastest-growing Internet portal operator Livedoor, has taken advantage of out-of-hours trading to mount a hostile takeover of Nippon Broadcasting System, the radio affiliate of the country’s largest network, Fuji TV.
This gives Horie undue sway over giant Fuji TV because of an unusual share structure in which the much smaller NBS — which has a market capitalization of ¥180 billion ($1.7 billion) — owns a disproportionately large 22.5% stake in Fuji, market cap $5.2 billion, and, hence, in its parent, the Fujisankei Communications Group — Japan’s largest media company.
It has been a hard lesson in modern merger and acquisition tactics for Fuji TV, which is also one of Japan’s most successful filmmaking outfits.
Fuji TV said in January it wanted to reverse the “distorted” cross-shareholding that enables investors with a controlling stake in NBS to influence its decisions. It made a $1.7 billion bid to increase its holdings in NBS from 12.39% to over 50% by Feb. 21.
All went smoothly until Feb. 8, when Livedoor revealed it had become NBS’ largest shareholder by acquiring 35% of shares (accounting for 37.67% of voting shares and thus veto rights over any management decisions) using a $560 million credit facility from Lehmann Bros.’ Japanese affil, Sunrise Finance. It should come as no surprise to Japan’s establishment that Horie masterminded the takeover. The best-known enfant terrible in the usually staid Japanese business world is noted for his flamboyant style, casual dress (still a taboo for business people) and his “President’s Blog” on the Livedoor site. He writes business books, with the bestselling one fittingly called “How to Build a Profitable Company.”
Horie dropped out from prestigious Tokyo U. in the mid-1990s to establish his Internet consulting firm Livin’ on the Edge — a motto that Horie maintains in his business dealings.
He succeeded in doubling revenue annually (also through aggressive mergers and acquisitions) and two years later bought struggling ISP service Livedoor from NewBridge Capital.
In 2004 alone, Livedoor spent more than $95 million acquiring four companies, but lost out on the lucrative franchise of a new baseball team to Rakuten, the country’s No. 1 shopping portal.
But baseball fan Horie has got his way — Fujisankei holds major shares in Yokohama BayStars and Yakult Swallows baseball clubs, although he denies this was his reason for the hostile bid.
As for Horie’s attempt on NBS, an irate Fuji TV is still aiming to raise its stake in NBS from 12.4% to 25% and has extended the deadline to March 2.
NBS’ stock price has fallen closer to the level of Fuji’s offer price, having gyrated widely during the past week.
However, few thinkFuji TV will go through with this since, under Tokyo Stock Exchange rules, the top 10 shareholders in a listed media company cannot control more than 75% of it. If Fuji pursues the buy-up NBS will be delisted.
Hostile takeovers are rare in Japan, where close ties between companies and their lenders typically result in friendly mergers. Japanese broadcast media are also protected from takeover bids by aggressive international investors because the country’s radio law limits foreign ownership.
Livedoor’s bid shows these companies are not insulated from market forces as long as their shares are listed on a stock exchange.
And for the country’s arcane world of film and media businesses — which is long used to cross-shareholdings and a cozy group mentality that keeps out unwelcome intruders — the NBS saga is a first lesson of things to come and sparks to fly.