Sapporo May Mull Tie-Up Talks With Rival Brewers

By Takuya Karube, Kyodo News International, Tokyo

Feb. 16–TOKYO — Beer maker Sapporo Holdings Ltd., facing an unsolicited takeover bid from a U.S. investment fund, said Friday it may consider getting together with one of its domestic rivals if it receives a friendly tie-up proposal.

A Sapporo executive said a friendly merger proposal from another company, acting as “white knight” to save the brewer from a hostile takeover, would be worth examining.

“At this moment, there is no such thing,” Yoshiyuki Mochida, a Sapporo director, said at a news conference in Tokyo, when asked whether Japan’s third-largest beer company had held any tie-up talks with its domestic rivals as a way to counter the bid.

“But from now on if there is such a proposal, we will look at it in a concrete manner,” said Mochida, a day after Steel Partners Japan Strategic Fund announced a buyout bid for Sapporo.

Shinji Saito, a Sapporo representative director, also said Sapporo has not engaged in any merger negotiations with other companies.

Sapporo’s main lender Mizuho Corporate Bank is exploring the possibility of forming a tie-up between Sapporo and other Japanese major brewers, according to sources familiar with the matter.

Separate sources said Asahi Breweries Ltd.’s main lender Sumitomo Mitsui Banking Corp. has encouraged Asahi to ally with Sapporo behind the scenes.

But the sources said Sapporo and Asahi have so far expressed reservations about complying with the ideas of the banks.

Mochida, talking to some reporters after the news conference, denied any approach from financial institutions.

“Nothing concrete has happened,” he said, but suggested that financial institutions “say all sorts of things.” Earlier in the day, Sapporo and Asahi denied a newspaper report that Asahi had proposed management integration to Sapporo.

Asahi is Japan’s top beer company by shipments, but is followed very closely by Kirin Brewery Co.

Asahi and Sapporo used to be a single company until they were split from Dai Nippon Breweries Co. in 1949.

The Yomiuri Shimbun newspaper said in its Friday morning edition that Asahi had proposed management integration to Sapporo in unofficial talks late last year.

Steel Partners, Sapporo’s biggest shareholder with an 18.6 percent stake, proposed raising its stake in Sapporo to 66.6 percent in terms of voting rights.

Calling its buyout bid “friendly,” Steel Partners, run by financier Warren Lichtenstein, said it will implement a public tender offer to acquire the targeted stake if it obtains approval from Sapporo’s board.

Sapporo, headquartered in Tokyo, said Thursday it will consider whether to resort to a package of anti-takeover measures.

Mochida said Sapporo is now examining the proposal by the investment fund and so does not yet have an assessment of whether it is good or bad.

But when asked what Sapporo thinks is the reason that the brewer has become an acquisition target of Steel Partners, he said “We also want to know why. We are not sure.” Among Japan’s major beer brewers, Sapporo was the only one to report falls in sales and profit. On Friday it reported a 35.6 percent fall in its group net profit for the 2006 business year to December, as its sales fell 4.1 percent due to poor sales of beer and beer-like beverages.

Mochida said Sapporo has chosen Mizuho Securities Co. as its financial adviser in connection with the proposal from the U.S. fund.

On Friday, Sapporo’s board of directors decided to revise its current set of measures against takeover bids, introduced about one year ago without shareholder approval.

Steel Partners has urged that the measures be abolished.

Sapporo said it will seek approval of the revised defense measures at a general meeting of shareholders on March 29.

If the Sapporo board rejects the buyout proposal, it is believed that Steel Partners may launch a hostile takeover bid for the brewer.

Last October, the U.S. investment fund launched a hostile takeover bid for Japanese noodle maker Myojo Foods Co., but the attempt failed as Nissin Food Products Co., the country’s largest instant noodle maker, emerged as a white knight and turned Myojo into a subsidiary through stock swaps.

But the failed attempt was not a heavy blow to Steel Partners.

Myojo’s share price was boosted by the launch of the hostile takeover bid and Steel Partners was able to generate a huge profit, apparently about 3.6 billion yen, after selling its entire 23.1 percent stake in Myojo to Nissin.

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