News Archive : Japan Real Estate

Friday, November 11, 2005

Cerberus, Nikko To Acquire Stake In Seibu Group

Cerberus, Nikko To Acquire Stake In Seibu Group

By ANDREW MORSE
Staff Reporter of THE WALL STREET JOURNAL
November 10, 2005; Page C4

TOKYO -- Cerberus Group and Nikko Principal Investments Japan Ltd. are expected to announce today an investment of about $1.4 billion in the Seibu Railway Co., ending a saga of control of the Japanese rail-and-property conglomerate once run by the world's richest man, a person familiar with the deal said.

[Yoshiaki Tsutsumi]

Under terms of the deal, U.S. private-equity group Cerberus will pay about $900 million for about 30% of a new holding company, tentatively named Seibu Group Holding. Nikko Principal, a unit of Japanese brokerage firm Nikko Cordial, will invest about $500 million for a stake of as much as 20% in the new company. The combined holdings of the two investors won't exceed 50%, the person said.

The deal values Seibu Group Holding at just under $3 billion. Representatives for Seibu and Nikko declined to comment. Cerberus couldn't be reached for comment.

The Cerberus-Nikko investment will end nearly a year of wrangling over Seibu, which has attracted the interest of investors from Goldman Sachs Group Inc. to Morgan Stanley and pitted members of Japan's Tsutsumi family against each other.

Seibu, which is controlled by Yoshiaki Tsutsumi, has looked to outside investors for money to fund a restructuring of the firm, which was delisted in December 2004 after a scandal. Earlier this year, Goldman Sachs proposed buying the company in its entirety. And last week, two brothers of Mr. Tsutsumi announced they were considering a tender offer for Seibu that would value the company at $4.9 billion.

But Seibu management favored the Cerberus-Nikko investment because neither demanded a one-third holding, which would allow them to veto management decisions, the person familiar with the deal said.

The Cerberus-Nikko deal likely will leave Mr. Tsutsumi, who was named the richest man in the world six times by Forbes magazine during Japan's stock-and-property boom in the late 1980s and early 1990s, with about 5% of the new company. Mr. Tsutsumi owns 36% of the real-estate company at the center of the Seibu group.

The Seibu Group consists of four main companies, including luxury hotels and resorts, that have interlocking ownership structures. The company will be reorganized with two wholly owned operating units -- railways and hotels -- under the holding company, the person familiar with the plan said.

Write to Andrew Morse at andrew.morse@wsj.com <mailto:andrew.morse@wsj.com>1