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3RD LD: Murakami Fund responds to Hankyu buyout bid for Hanshin.

OSAKA, June 19 Kyodo

(EDS: UPDATING)

Hankyu Holdings Inc.'s public tender offer for Hanshin Electric Railway Co. shares was successfully concluded Monday, with the Murakami Fund, Hanshin's biggest shareholder, responding to the offer to sell its entire stake of about 47 percent in Hanshin, sources familiar with the matter said.

The successful conclusion of the tender offer sets the stage for management integration between Hankyu and Hanshin in October, the first merger among major private sector railway firms since the end of World War II.

Hankyu closed the tender offer, launched May 30, at 4 p.m. and is expected to make the results public Tuesday.

With Hankyu's offering price of 930 yen per Hanshin share, the Murakami Fund will receive some 180 billion yen by selling its entire holding of Hanshin shares, the sources said. As it purchased them at an estimated average price of nearly 700 yen per share, it will earn more than 45 billion yen in net profit.

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

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.

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

Hanshin stock ended Monday's trading on the Tokyo Stock Exchange at 896 yen, down 3 yen from Friday, after falling to 830 yen at one point.

Hankyu's stock ended at 557 yen, up 5 yen from Friday.

Some Hanshin investors apparently responded to Hankyu's takeover bid as they apparently found it more attractive to sell Hanshin shares than to receive relatively low priced Hankyu shares, the sources said.

If a large number of Hanshin shareholders other than the Murakami Fund took up the tender offer, the buyout cost could hurt Hankyu's balance sheet, they said.

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.
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Publication:Japan Weekly Monitor
Date:Jun 19, 2006
Words:435
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