News Archive : Japan Real Estate

Friday, November 11, 2005

Tsutsumi Brothers, Investment Banks to Launch Rival Bid for Seibu Railway

Seibu founding family members aim to buy back scandalized firm
http://www.asahi.com/english/Herald-asahi/TKY200511010126.html

11/01/2005

The Asahi Shimbun

In an apparent bid to block the planned reorganization of the Seibu Railway Co. group, two brothers in the founding family said Monday they plan a public tender offer to buy out the scandal-ridden railway.

As a second option, Seiji and Yuji Tsutsumi-brothers of Yoshiaki Tsutsumi, the disgraced former chairman of Kokudo Corp.-said they are prepared to invest about 330 billion yen to obtain the largest share of a new group holding company.

The brothers informed the Seibu Railway and Kokudo boards of directors of the two plans. In a statement issued on Monday, the two companies said it is difficult to consider the proposals realistic.

The current management of Seibu Railway, whose group was built by the brothers' father Yasujiro Tsutsumi, is trying to reduce the founding family's influence by setting up a holding company by next March.

Seibu Railway was delisted from the Tokyo Stock Exchange in December for falsifying financial statements. Kokudo owns 61.6 percent of Seibu Railway shares.

The Seibu Railway group plans to raise up to 160 billion yen by selling shares to investors and other measures.

U.S. investment fund Cerberus Group, which would contribute about 90 billion yen, is expected to become the leading shareholder of the group holding company.

The Tsutsumi brothers proposed that they pay 330 billion yen for a 49 percent stake in the holding company.

In the takeover bid for Seibu Railway, Seiji and Yuji Tsutsumi plan to offer 1,150 yen to 1,300 yen per share.

They estimate that the group's capital increase plan is based on a Seibu Railway share value of about 700 yen.

The brothers are offering what they believe is a premium to attract individual investors.

The cost for 100 percent ownership under terms of the offer would be 500 billion yen to 560 billion yen.

The brothers are negotiating with investment banks and others to secure funds.

Connected with the two brothers' move are the lawsuits in which they and other relatives claim they had legally inherited 55 percent of Kokudo shares, which are currently held under the names of Yoshiaki Tsutsumi and other group executives.

Seibu group companies, including Kokudo, have a combined share of more than 70 percent of Seibu Railway.

Depending on the outcome of the lawsuits, however, the two brothers could emerge as major Kokudo shareholders.

Seiji Tsutsumi, half brother of Yoshiaki, is a former chairman of Seibu department stores. Yuji Tsutsumi is a hotel operator.

In starting their takeover bid, the two men are prepared to sue Seibu Railway and Kokudo if the two companies refuse an assessment of their assets.

Yuji Tsutsumi has also filed for an injunction to block an extraordinary shareholders meeting to establish the group holding company.(IHT/Asahi: November 1,2005)

Banks seek talks with Tsutsumi brothers
By FT.com / November 04, 2005 03:45 PM

Foreign investment banks that were turned down as potential investors in Seibu Railway are seeking talks with the brothers of Yoshiaki Tsutsumi, the convicted former patriarch of the company, who are trying to launch a rival buy-out offer of up to Y560bn (USDollars 4.8bn) for the embattled company.

Goldman Sachs, Morgan Stanley and other investment banks are understood to be preparing for discussions with Seiji and Yuji Tsutsumi, who are raising funds for a counter-offer for Seibu at between Y1,150 and Y1,300 per share, according to people close to the deal.

The move could delay next week's planned final agreement on a deal under which Cerberus, the US private equity fund, and Nikko Principal Investment would make a Y160bn investment in Seibu Railway. The investment would makeCerberus the biggest shareholder in Seibu Railway, with up to a third of the company.

The chairman of Nikko Principal Investment, a Japanese private equity fund, indicated that the Tsutsumi brothers' audacious bid to take control of the Seibu group was not viable. "We are not worried about their threat because what they are doing is trying to slow down the process," said Hirofumi Hirano. "We have to finish this (investment in Seibu) by March so if the brothers slow down the process,then the whole group willcollapse."

Mr Hirano said the Y160bn would be used to pay Seibu's debt, and for capital expenditures on its properties.

Seiji Tsutsumi, Yoshiaki's half-brother, and YujiTsutsumi, Yoshiaki's brother, rattled the markets this week when they announced their planned counter-offer. Yuji Tsutsumi said that the Cerberus-led deal would have valued each Seibu share at about Y700.

The brothers said they were trying the raise the necessary funds among domestic and international banks in a move to block Seibu's restructuring plan. Seibu Railway, which was delisted last December, has about 433m outstanding shares. Kokudo, Seibu's parent company, owns 80 per cent of Seibu Railway, and Yoshiaki Tsutsumi is the single biggest shareholder in Kokudo, with a 36 per cent stake.

A court ruling in June, however, recognised that Yuji Tsutsumi and other family members also have a stake in Kokudo, which they inherited from their father, Yasujiro Tsutsumi. Yuji, Seiji and two other family members claim they own a 55.4 per cent stake in Kokudo, which would enable them to control SeibuRailway.

The Kokudo extraordinary shareholders' meeting is expected to be held at the end of November. YujiTsutsumi has filed a lawsuit to stop the meeting.Additional reporting by Michiyo Nakamoto

DAVID IBISON, MICHIYO NAKAMOTO and MARIKO SANCHANTA
(C) Copyright The Financial Times Limited 2005. 'FT' and 'Financial Times' are trademarks of The Financial Times.

Starwood Ready To Help Tsutsumi Bros Acquire Seibu Railway

November 10, 2005
Starwood Ready To Help Tsutsumi Bros Acquire Seibu Railway

TOKYO (Nikkei)--Starwood Capital Group Global LLC is willing to fund the tender offer for Seibu Railway Co. proposed by Yuji and Seiji Tsutsumi, two members of the railway group's founding family, The Nihon Keizai Shimbun learned Wednesday.

The U.S. investment firm is poised to invest up to 5 billion dollars, or about 580 billion yen, enough to fund the entire acquisition, according to sources.

Ever since the Tsutsumi brothers announced last week their tender offer proposal -- an alternative to Seibu Railway management's restructuring plan that calls for shifting to a holding company structure -- they have been receiving inquiries from investment firms and nonfinancial companies from home and abroad. Goldman Sachs Group Inc. and Morgan Stanley have been reported as potential sponsors.

Starwood Capital Chairman and Chief Executive Officer Barry Sternlicht notified Yuji Tsutsumi of the decision to invest. Because the Connecticut-based firm has conducted assessments of the locations and operations of the Seibu Railway group's hotels, it said that it would be able to provide fund quickly if the parties can reach an agreement.

In 1995, Sternlicht acquired a real estate investment trust that specializes in hotels and renamed this Starwood Lodging Trust. Since then, the Starwood group has taken control of several major hotel chains, including Westin and Sheraton.

In August, the group acquired France's Taittinger SA, known for its champagne and the luxurious Hotel de Crillon in Paris, for 2.1 billion euros, or about 290 billion yen.

Starwood Capital bought the Westin Hotel Tokyo last December for about 50 billion yen, jointly with the Morgan Stanley. In addition, it announced a plan to spend 500 billion yen over three to five years starting this year to acquire other hotels and commercial facilities in Japan.

Meanwhile, the Tsutsumi brothers are in talks with Mori Trust Co. to form a partnership to rehabilitate the Seibu Railway group's struggling resort business after the brothers complete their acquisition of Seibu Railway.

Because Mori Trust operates resorts in areas where the Seibu Railway group's hotels and golf courses are concentrated, the major building developer envisions joint development projects.

(The Nihon Keizai Shimbun Thursday morning edition)