5TH LD: Sapporo's anti-takeover steps approved by shareholders.

TOKYO, March 29 Kyodo

(EDS: ADDING 13TH, 15-16TH GRAFS)

Sapporo Holdings Ltd. said Thursday its anti-takeover measures were approved at its general shareholders meeting, a move that could exacerbate its tense ties with U.S. hedge fund Steel Partners over their acquisition battle.

The approval given at the nearly three-hour-long shareholders meeting will be a blow to the hedge fund, which is seeking to acquire a controlling stake in Sapporo, Japan's third-largest beer maker.

Prior to the meeting in Tokyo, the hedge fund called on Sapporo shareholders to reject the brewer's proposal to introduce the defense measures, saying they will run counter to investor interests by providing extra power to the board.

On Feb. 15, Steel Partners Japan Strategic Fund said it wants to raise its stake in Sapporo to 66.6 percent through a tender offer if it obtains approval from the brewer's board.

Steel Partners is already the biggest shareholder in Sapporo with about a 19 percent stake after the fund began to purchase its shares nearly three years ago.

''With the approval, we renewed our resolve to raise our corporate value,'' Sapporo President Takao Murakami told reporters at the company's head office after the meeting, attended by a record 1,157 shareholders.

Sapporo said the proposal was approved by a more than two-thirds vote, adding that an all-time high 81.3 percent of voting rights were exercised at the meeting.

In a statement, Warren Lichtenstein, managing partner of Steel Partners, said the fund is ''disappointed'' that the proposal was approved.

International Shareholders Services Inc. and Glass Lewis & Co, both major U.S. proxy advisory firms, had also recommended Sapporo shareholders to vote against the proposal.

The stock of Sapporo -- which had risen to 960 yen since the fund's announcement of the buyout proposal -- ended Thursday at 828 yen, down 3 yen from the previous day.

The ending price has come close to Steel Partner's offer price of 825 yen for each share.

Sapporo, which also distributes Guinness beer and Smirnoff Ice Vodka drinks in Japan and has rich real estate assets, asked the fund earlier this month to give more details about the aim of the proposed acquisition.

Sapporo could call for such information if a suitor intends to acquire more than 20 percent of the brewer's voting rights.

Murakami said the company has not received any answers to its list of questions from Steel Partners.

There is no time limit for Steel Partners to submit a report detailing the purpose of the buyout, but the fund has already said it is difficult to respond to the questionnaire, claiming that it demands too much information, according to Sapporo officials.

But Murakami said, ''We cannot say anything other than that we are waiting for replies,'' when asked whether Sapporo has any intention of sitting at the negotiating table with Steel Partners.

Sapporo sees the proposal as unsolicited and is concerned that Steel Partners may launch a hostile takeover bid.

Under Sapporo's defense scheme, its board members will be able to evaluate the buyout proposal during a period of up to 90 days after it receives satisfactory answers from the fund to its queries.

Sapporo can resort to a poison pill defense -- a system designed to issue equity warrants to its shareholders excluding an unfriendly acquirer -- if the board concludes that the buyout proposal will harm its corporate value after hearing third-party opinions.

The issuance of equity warrants would dilute a hostile acquirer's shareholdings so as to prevent a takeover.

The defense could also be implemented in the case of a hostile purchaser raising its stake in Sapporo or trying to buy more Sapporo shares during the study period.

Sapporo's anti-takeover measures were introduced last year but they were only approved by its board of directors at that time.

To guarantee fairness to all shareholders, the beer maker this time sought approval at the annual meeting.

Sapporo is owned about 30 percent by foreign investors, 32 percent by Japanese financial institutions, 21 percent by individual investors and the rest by Japanese corporate entities.

In Japan, Steel Partners first made headlines in 2003 when it launched hostile takeover bids for Japanese companies Yushiro Chemical Industry Co. and Sotoh Co.

Unfriendly takeover attempts were still very rare in the country at that time and the two takeover bids were unsuccessful.

But the fund managed to extract sharp dividend hikes from Yushiro Chemical and textile dyer Sotoh.

The fund then kept a relatively low profile in Japan until last October when it launched an attempt to acquire noodle maker Myojo Foods Co. It subsequently sold its stake to Nissin Food Products Co. for a profit.

Steel Partners, which began investing in Japanese firms in 2001, is now a major shareholder in such firms as Ezaki Glico Co., Aderans Co. and Noritz Corp.