Livedoor - Why Do They Have Money?

[Mulboyne]

Most of the other proposals are on the table anyway since regulations on stock-for-stock mergers are to be loosened. Basically, it will become a little easier for foreign companies to acquire a Japanese company by paying in shares rather than cash i.e. shareholders of the target company would get shares in the acquirer or, more likely a "holding company" set up by the acquirer.

However...
Kyodo via Yahoo: Japan likely to postpone step for easier M&A by foreign firms

Japan is likely to postpone a measure to ease restrictions on foreign companies' mergers and acquisitions of Japanese firms for one year until 2007, as urged by the ruling Liberal Democratic Party, LDP sources said Friday. The step is part of a package of bills to revise the nation's corporate law, now under preparation. The step allows foreign company shares, cash and the like to be used for acquisitions of Japanese companies...The postponement will allow Japanese companies to digest these measures and prepare to cope with hostile takeover bids, the sources said.

[Mulboyne]

Bloomberg: Livedoor Wins Court Injunction in Nippon Broadcasting Takeover

Livedoor Co., an Internet investor that made a hostile offer for a $2 billion unit of Japan's biggest media group, won a court injunction against a stock sale that is designed to thwart its bid. Tokyo District Court today granted an injunction blocking Nippon Broadcasting System Inc.'s plan to sell stock options to rival bidder Fuji Television Network Inc., said Masao Sakai, a senior executive managing director at Fuji TV. Nippon Broadcasting will object to the ruling, he said, without being specific.

Nippon Broadcating has announed it will appeal. NHK just devoted over a quarter of an hour of the 7 o'clock news to this decision. It seems that the court ruling was very favourable to Livedoor. It rejected the claim that their acquisition of the NBS stake was illegal; it rejected the claim that the share issuance was to protect the company rather than the management and also rejected the claim that a takeover by Livedoor would damage NBS. This is only a district court judgement, though, so it an appeal or higher court ruling could yet go the other way.
Currently, it is deadlock. Livedoor can't dismiss NBS management but they can block their re-appointment later this year. Meanwhile, Fuji TV can block Livedoor actions and, since their stake in NBS is over 25%, Livedoor cannot exercise any voting rights in Fuji via NBS' shareholding in Fuji.

[canman]

NHK has just gone over the 30 minute mark reporting on this issue. I love the comment by the president of NBS, that Horie's actions were like a terrorist attack on the stock market. And that after hours trading is unfair and illegal. What a big baby. Come on take it like a man up the ass.

[Mulboyne]

Kyodo via Yahoo: Fuji TV softens stance, may consider tie-up with Livedoor
Fuji Television Network Inc. Chairman Hisashi Hieda said past midnight Friday that his company may form a business tie-up with Livedoor Co., voicing the possibility for the first time in the monthlong battle with the Internet company over control of Nippon Broadcasting System Inc. Hieda has previously categorically rejected a tie-up offer from Livedoor and the about-face was apparently triggered by a court ruling earlier Friday in favor of Livedoor over the acquisition battle. "If there are some merits, we can consider forming a business alliance with Livedoor," Hieda told reporters following the decision by the Tokyo District Court to bar Nippon Broadcasting from selling massive equity warrants to his company in a bid to thwart Livedoor's hostile takeover bid.

[Mulboyne]

[Taro Toporific]

NBS may sell key assets if taken over by Livedoor: NBS chief
TOKYO, March 14, Kyodo
Nippon Broadcasting System Inc. may sell its shareholdings in music company Pony Canyon Inc. to Fuji Television Network Inc. if the radio company is taken over by Livedoor Co., Nippon Broadcasting President Akinobu Kamebuchi said Monday.
''We are studying selling Pony Canyon shares to Fuji TV if our company comes under Livedoor,'' Kamubuchi told reporters. Nippon Broadcasting controls 56 percent of outstanding Pony Canyon shares.
Livedoor is locked in a heated race with Fuji TV to take over Nippon Broadcasting. The Internet services company has sent letters to all board members of Nippon Broadcasting, asking them to keep holding key assets, such as shares in Fuji TV and Pony Canyon, sources close to the matter said Sunday.
The move by Livedoor is seen as an attempt to prevent Nippon Broadcasting from adopting a ''scorched earth'' defense strategy to reduce its corporate value by selling off important assets to make itself less attractive to Livedoor.....more...

[GuyJean]

..a ''scorched earth'' defense strategy [/b]to reduce its corporate value by selling off important assets to make itself less attractive to Livedoor.....more...

Suicide is so trendy these days..

GJ

[canman]

Livedoor. I am a little surprised I thought for sure one of these court rulings were going to go against Livedoor. I was just watching the news and they were having a kind of tribute to NBS. Its not like the company just went tits up or anything they just have a new parent company. But I guess for the rank and file Livedoor taking over is like death by a thousand cuts. Slow and painful.

[Mulboyne]

This is one of the better comments I've seen on the Livedoor/Fuji battle:

Japan Times: RYU MURAKAMI - Straight-talking wordsmith wields his pen like a sword

Throughout your career, you have consistently written about youth culture and represented the voice of the youth. At the moment, are you supporting "Horiemon" [a nickname for Takafumi Horie, the president of Livedoor, who is embroiled in a takeover battle with the Fujisankei media group]?

I regard Horie as more of a financier than an IT businessman; someone who is good at money games. I could be wrong, because I don't know him well, but he doesn't seem to be creating an original service or business model in the fields of IT or the Internet. To put it harshly, he seems to be someone who maneuvered well during the 2000-2001 IT bubble, got funds, then became successful through money games. It's only natural for someone like him to choose the Nippon Broadcasting System Inc. as an M&A target.

I have many friends in the IT industry, and they all hate the Japanese ojisan (middle-aged men). Their super-efficient world, symbolized by IT itself, is so different from the world of vested interests those ojisan inhabit. So I can understand such feelings (of sympathy for Horie), but you need to have a clear strategy on how to fight those vested interests and integrate your values with those of the establishment into something new. I haven't quite figured out whether Horie has such a strategy.

The media should take the blame as well, as they tend to ask people whether they support Fuji Television or Livedoor. The issue should not be discussed on such a level. The Japanese media like yes-or-no questions, like, "Is the SDF dispatch to Iraq good or bad?" "Which side are you on, Horie's or Fuji TV Chairman Hisashi Hieda's?"

What could be improved about Horie's approach?

Oh, it's very difficult. I guess the basic buyout plan can't be changed, but what kind of announcements to make, for example, when appearing on a radio program, is a tough judgment call. I don't think his announcements so far have been well-thought out. I think he is wasting his chances. Of course, I also think it is ugly of the top managers of NBS and Fuji TV to be acting that timidly.

Why do you think his announcements are poor?

The media are partly at fault, but the term shihai has been used (in connection with Livedoor's takeover bid for the radio broadcaster). In English, there are several words that capture the concept of shihai in varying nuances, such as "control," "govern," "manage" and "dominate." But in Japan, the word shihai conjures up the image of "dominate" only. For sararimen, that means enslavement.

But in reality, if Rupert Murdoch buys a media company, he would never enslave its employees. He would try to keep the smart ones. NBS wouldn't change much with the change of management. If you want to produce a radio program, you have to work with producers and screenwriters, and there aren't that many of them. The whole affair is drawing a lot of attention, because it's symbolic, but I don't think many people are that interested. Eventually, I think, people will realize that the company will change little, and they will get bored, though it must be a big deal for the top executives of Fuji and NBS.

[Captain Japan]

Livedoor shares drop to record low price
Japan Times

Market confidence in Internet company Livedoor Co. appeared to ebb Tuesday as its share price temporarily dropped to a record low of 292 yen on the Tokyo Stock Exchange.
Livedoor shares ended the day at 293 yen.

It was the third day in a row Livedoor's share price has fallen, and its first close below 300 yen since it was listed in April 2000.

Observers said market players are growing wary of Livedoor's prospects because of the lack of visible progress in its effort to forge an amicable alliance with Fuji Television Network Inc.

The company has also incurred about 10 billion yen in latent losses from a drop in the price of Nippon Broadcasting System Inc., for which Livedoor holds a majority stake, market players said....more...

[Mulboyne]

MDN: Livedoor looks to sell Nippon Broadcasting shares to Fuji TV after truce
After a long and bitter battle for control of Nippon Broadcasting System, Livedoor Co. and Fuji Television Network Inc. have called a truce and have been discussing a compromise in which Livedoor would sell its shares in the radio firm to Fuji TV, sources said on Wednesday...In talks between Livedoor and Fuji TV, a proposal is also under discussion in which Fuji would own a stake in Livedoor by buying newly issued shares in the Internet services provider. "We are discussing future issues, including those involving Nippon Broadcasting, with Livedoor," Fuji TV said in a released statement. "We will announce details of our talks when we reach an agreement."

[gkanai]

This whole story as well as the reaction of the national news around it is a clear red flag for foreign firms who might want to do an LBO or hostile takeover in Japan. If a Japanese firm can't be successful doing this, then there's less chance for foreign firms to do this.

In my mind this is a big step backwards for Japan.

[Mulboyne]

One of the issues raised by this episode is the nature of corporate governance and here there have been some very positive moves. The courts did not permit NBS to dilute Livedoor out of existence through an issue of warrants (shares) to Fuji TV. Ten years ago I can well imagine a court supporting NBS' contention that Livedoor would materially damage the company and allowing the warrant placement.
The regulators have closed the loophole which allowed Livedoor to acquire their NBS shares without making a formal tender offer. Although this means that one hostile tactic is closed down it also means that a target company cannot in the future circumvent a formal tender offer by means of an off-exchange transaction.
Additionally, firms such as Toyota did not allow their business ties with Fuji to influence their disposal of NBS shares. Fuji had a tender offer for NBS out at a price lower than that prevailing in the market. Toyota elected to sell at the higher price which meant their shares became available for Livedoor. TEPCO, on the other hand, chose to sell to Fuji at the tender price and officers of the company are now subject to a shareholder lawsuit on the grounds they knowingly undersold a company asset. I don't expect the suit to succeed but it will give other managements pause for thought in similar circumstances.
In fact, the legal accountability of company executives has been one of the big wins over the last few years. The best example of this is Tsutsumi's current incarceration over the alleged fraud at Seibu/Kokudo. There was also the criminal conviction of Takei at Takefuji and the subsequent requirement for him to sell down his stake in the company he founded (and the tax office's claim that his son avoided taxes on the transfer). Former Sogo Chairman Mizushima just received last month a suspended 18-month sentence for trying to conceal personal assets from creditors. The current management of Kanebo intends to initiate legal action against former officers of the company for producing fraudulent financial statements. Citibank lost their private banking licence in Japan for failure to oversee a business unit and prevent fraud.
The punishments may not look very severe but the fact that these company officers are being held accountable is a major step forward. One aim of a hostile takeover is to turn an underperforming asset into a more productive company. However, incumbent managements now have stricter rules governing their conduct and so some of the abuses which have produced this underperformance will be squeezed out.
One indicator of this change is the reassessment of Directors and Officers Liability Insurance (D&O Insurance). Typically, you would take out this insurance to cover costs of any legal action against you - in particular any financial claims against you as on officer of a company being sued by a customer, shareholder etc. Since the risks in Japan have been low, D&O insurance has cost very little. The price is now rising.

I don't believe that many foreign firms were actively considering hostile bids in Japan. Those under discussion now are purely friendly so the Livedoor/NBS drama has few repercussions. Some funds have tried to be closet greenmailers under the guise of corporate activists and their work will be a little harder. But Murakami of MAC Consulting, who started the whole NBS battle by taking a major stake originally and pressing for Fuji to buy him out, has already moved on to his next target. He has just bought into the Osaka Stock Exchange.

It's a bit too early to say whether Livedoor has succeeded or failed - largely because Horie has never said what his intentions were. The assumption is that his target was a takeover of Fuji. If that was his real aim, then he seems to have failed. In public, he has said that he wants a business alliance with Fuji and it is possible that he will get one. Alternatively, he may just have wanted to make some money and raise the profile of his company. He has certainly achieved the second goal but we need to see the numbers to see if he is close to the first.

[Mulboyne]

A comedy business proposal from TBS

Kyodo via JapanToday: TV networks need cross-shareholding ties, says TV Asahi head
The president of TV Asahi Corp, Michisada Hirose, said Tuesday that Japanese television networks should establish cross-shareholding ties to ward off hostile takeover attempts. TV networks can defend themselves from such moves if they hold a small stake in each other, Hirose said at a press conference.

[Mulboyne]

I think this story confirms that the regulatory environment governing management behaviour has changed remarkably in recent years.

Kyodo via Japan Today: Media Lynks head jailed for insider trading

The president of Media Lynks Corp was sentenced Monday to three and half years in prison for committing insider trading and falsifying annual financial statements. The Osaka District Court also ordered Yoshihiko Shindo, 48, president of the Osaka-based computer software company, to pay a 2 million yen fine.

The original story:

JapanTimes: Executive held over insider trading

The president of computer firm Media Lynks Corp. was arrested by prosecutors Wednesday on suspicion of insider trading. Yoshihiko Shindo, 48, and his 45-year-old former wife allegedly avoided capital losses by selling 456 shares of Media Lynks held by his relatives on Osaka's Hercules market May 27 and May 28, 2003, with the knowledge the company would soon revise downward its earnings projections for the business year to March 31, 2003, the prosecutors said. After the announcement of the earnings projections in early June, the price of the stock plunged to around 29,500 yen from around 40,000 yen seen at the time the shares were sold. Without the sale, Shindo would have incurred a capital loss of 4.7 million yen.

[dimwit]

I read an article a few years ago in FEER I believe, that talked about Japan as being one of the worse countries when it come to managers disregard for shareholder value. I wonder if the same is still true today?

[GuyJean]

Prosecutors raid Internet giant Livedoor for manipulating stock prices
http://mdn.mainichi-msn.co.jp/national/news/20060116p2a00m0na027000c.html

Prosecutors raided Internet giant Livedoor Co. in Tokyo on Monday on suspicion that its president, Takafumi Horie, and other employees manipulated its stock prices, sources at law enforcement authorities said.

The sources said Horie, 33, and other staff members released false information about Livedoor and its affiliates on the Internet before and after it took over another firm in 2004 in a bid to jack up the prices of their shares in violation of the Securities and Exchange Law.

Rop Hills was complete mayhem this evening.. Crazier than a soiled-panty 2-for-1 sale at Akihabara Station..

GJ

[cstaylor]

Somehow I think this raid could have been averted if Horiemon had won district #6.

[Captain Japan]

Crazier than a soiled-panty 2-for-1 sale at Akihabara Station..

And here's the panty peddler himself...

[GuyJean]

Somehow I think this raid could have been averted if Horiemon had won district #6.

I've been avoiding Horiemon news recently; did he want to become a politician?

GJ

[IkemenTommy]

[quote="GuyJean"]I've been avoiding Horiemon news recently]
No, but I thought he wanted to become an actor next..

[Mulboyne]

He did run for office as one of Koizumi's assassins but lost. You can still buy his genki drink and jeans.

Rop Hills was complete mayhem this evening.. Crazier than a soiled-panty 2-for-1 sale at Akihabara Station.

You certain that wasn't the new maid cafe?

[Mulboyne]

If the investigation turns anything up then the title of this book becomes more interesting

Very free translation: "Horie's Guide to Building a Profitable Company the Easy Way"

According to Amazon, he has "authored" 26 titles including one which offers english translations of his blog. There's this from page 12:

I found a really interesting product on the Livedoor Department Store site! It's the prosthetic nipples that some people say Maria Sharapova wears

[gkanai]

There's no "there" there at Livedoor. Buyer beware.

[Greji]

Prosecutors raid Internet giant Livedoor for manipulating stock prices
http://mdn.mainichi-msn.co.jp/national/news/20060116p2a00m0na027000c.html
Rop Hills was complete mayhem this evening.. Crazier than a soiled-panty 2-for-1 sale at Akihabara Station..

GJ

I was bargin shopping at Akihabara Station, so missed the first feeding frenzy. When I got back to Rop Hills in the afternoon it was still going on in fine form. Some people who I have talked to who are supposedly in the know, have said that certain elements are trying to get back at Horiemon for his "foreign styled" business tactics with the market, but they do say that even at that, they don't think it will come to much, a fine and slap on the wrist at best! Who knows? In that area of the J-business sector, it is best not to throw stones from within your own glass tower.

[GuyJean]

I was bargin shopping at Akihabara Station, so missed the first feeding frenzy..

You missed the huge sell-off of soiled Mother's panties. ]Nikkei Slides After Livedoor Raid[/b]
http://edition.cnn.com/2006/BUSINESS/01/16/asiastocks.tuesday.reut/index.html

The Nikkei share average lost more than 2.8 percent on Tuesday, hit by losses in Softbank Corp. as worries grew over the fallout from news that prosecutors searched the offices of rival Internet firm Livedoor Co.

The Nikkei ended down 462.08 points at 15,805.95 for a decline of 2.84 percent -- its biggest percentage fall since April 2005.

The broader TOPIX index was down 2.31 percent at 1,631.61.

Livedoor was untraded on the Mothers market for start-ups with a glut of sell orders.

The Mothers market fell 11.76 percent to 2,469.89, its biggest fall since May 2004.

The J-authorities are such wussies; NHK reports that Livedoor 'communicated with other companies by email'.. Apparently they're accused spreading rumors they were about the buy a company they'd already acquired..

I agree; slap on the wrist..

GJ

[GomiGirl]

I predict a very loud thump when LD hits the ground - which it will.

I DO NOT like their business practices of buying up lots of small companies with lots of shady back door stock option deals. It is all vapour and hype at the moment. Unless they can produce something of substance, it will be a very ugly fall-out with lots of good people losing alot of money.

You can bet one of those people will not be the brillo-head.

Sorry to say it but sounds like I was right!!!

Livedoor was untraded on the Mothers market for start-ups with a glut of sell orders.

[cstaylor]

Interesting how the Jimento-controlled government decides to raid them on the exact same day that Huser's CEO is up to testify before the Diet about their construction fraud. IIRC, Huser was a big campaign contributer to Mori-ha, and Koizumi is #2 of that faction.

[Captain Japan]

NHK reports that Livedoor 'communicated with other companies by email'.. Apparently they're accused spreading rumors they were about the buy a company they'd already acquired..

Horie, two other Livedoor execs played key role in share scandal
Mainichi

Livedoor President Takafumi Horie and two other executives of the Internet giant played a central role when an affiliate gave false details in a bid to raise Livedoor's stock prices, investigative sources said on Tuesday.
The executives are Director and Chief Financial Officer Ryoji Miyauchi and Director Fumito Okamoto.
...snip...
Horie, 33, Miyauchi and Okamoto planned to take over the publishing firm Money Life in 2004. Under the plan, an investment fund controlled by Livedoor reportedly bought all shares in the publisher in June that year.
The three executives agreed to hide the fact that the fund had already bought Money Life and had Livedoor Marketing, whose name was Value Click Japan at the time, announce it would buy Money Life in October 2004, investigative sources said.

In November that year, the three wrongly said that Livedoor Marketing was in the black, although the affiliate hadn't made any profits at that time, the sources said.

I think the real question is: who blew the whistle and why?

[cstaylor]

I bet the government has been sitting on this story for a while and was looking for a good time to use it.

That'll teach Horiemon about lobbying and the benefits. Look how Huser's CEO could consult with his attorney during his questioning and refused to answer certain questions. Yes, there's article 38 in the Japanese constitution, but how often is it respected in the courts?