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3RD LD: Hankyu to acquire 64% stake in Hanshin for 250 bil. yen.

OSAKA, June 20 Kyodo


Hankyu Holdings Inc. said Tuesday it will acquire a 63.71 percent stake in Hanshin Electric Railway Co. for some 249.8 billion yen as a result of its public tender offer that closed Monday.

The successful conclusion of the tender offer sets the stage for management integration in October between the two railway operators in Osaka and its vicinity, the first merger among Japanese major private-sector railway firms since the end of World War II.

The 63.71 percent stake, or nearly 270 million Hanshin shares, to be acquired through the 21-day tender offer includes a stake of some 47 percent held by the Murakami Fund, Hanshin's biggest shareholder.

In addition to the Murakami Fund, many Hanshin shareholders responded to the tender offer, raising concerns raising concern that the buyout cost could hurt Hankyu's balance sheet. Hankyu has a consolidated interest-bearing debt of more than 1 trillion yen.

Hankyu and Hanshin plan to seek approval of their management integration at their respective shareholders' meetings on June 29, paving the way for the creation of a joint holding company, Hankyu Hanshin Holdings, on Oct. 1.

Excluding the Japan Railway group companies, the merged firm would become the nation's third-largest railway operator in terms of sales, following Tokyu Corp. and Kintetsu Corp. The JR group was created through the privatization of Japanese National Railways.

At a news conference held after Hankyu announced the results of the tender offer, the company's president, Kazuo Sumi, said, ''There emerged an extra fund demand of about 60 billion yen, compared with the initial plan.''

Incoming Hanshin President Shinya Sakai, who is now managing director, welcomed the successful conclusion of the tender offer at the same news conference.

''We will consider selling unnecessary assets,'' he said, suggesting proceeds from the sales of such assets will be used to cover debt payments of the merged firm.

Hankyu launched the buyout bid May 30, offering to buy Hanshin shares at 930 yen per share. The settlement of the Hanshin shares subject to the tender offer will start next Tuesday.

Through the tender offer, Hankyu aimed to acquire at least 45 percent of Hanshin's outstanding shares and set no upper limit on the number it would buy during the tender offer period.

The Murakami Fund will receive some 180 billion yen by selling its entire stake in Hanshin. As it purchased them at an estimated average price of nearly 700 yen per share, it will make a net profit of more than 45 billion yen on the shares.

''We hope corporate and shareholder values will increase as a result of the management integration,'' the Murakami Fund said in a statement.

The Murakami Fund's founder, Yoshiaki Murakami, was arrested June 5 on suspicion of insider trading. The fund, which emerged as a large Hanshin shareholder last September, apparently decided to sell its Hanshin stake to prepare for possible withdrawal of funds by client institutional investors following the arrest.

For Hanshin shareholders who did not respond to the tender offer, Hankyu plans to exchange 1.4 Hankyu shares for 1 Hanshin share.

Hankyu, which wants to limit the cost of the buyout, had hoped that Hanshin shareholders other than the Murakami Fund would opt for the stock swap and remain as shareholders of the merged firm.

But the ratio of shareholders other than the Murakami Fund who responded to the tender offer came to some 17 percent. Those shareholders apparently found it more attractive to sell Hanshin shares than to receive relatively low prices Hankyu shares.

On the Tokyo Stock Exchange on Monday, the final day of the tender offer, Hanshin stock finished at 896 yen, down 3 yen from Friday. Hankyu ended Monday's trading 5 yen higher at 557 yen.
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Publication:Japan Weekly Monitor
Date:Jun 26, 2006
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