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Seibu Group to Set Up Holding Company for Reconstruction

Posted on: Wednesday, 10 August 2005, 12:00 CDT

Aug. 10--TOKYO -- Seibu Railway Co. said Wednesday its group has chosen to reconstruct itself under a holding company, deviating from an earlier plan for the railway firm to absorb other key group members.

The holding company would own Seibu Railway and a new firm emerging from a merger between Prince Hotels Inc. and Kokudo Corp., it said.

The new hotel and resort company would absorb some hotels now run by Seibu Railway, it said.

The separation of Seibu Railway and the hotel and resort company under the holding company would help specify their respective financial responsibilities and allow them to focus on their respective business turfs, it said.

This would also enable the hotel and resort company to easily form alliances with firms outside the group to maximize its corporate value, Seibu Railway said.

Details of the reorganization will be released as soon as they are decided on, it said.

The Seibu Railway group is expected to set up the holding company within the current fiscal year that ends in March next year, sources close to the matter said.

Yoshiaki Tsutsumi, the group's effective leader who has been indicted for his involvement in the falsification of Seibu Railway's financial statements, may have a major equity stake in the holding company, which is expected to seek to go public later, they said.

After the group plunged into a crisis on Seibu Railway's false financial statements and its delisting from the Tokyo Stock Exchange last year, its management reform panel led by Taiheiyo Cement Corp. adviser Ken Moroi considered how best to rehabilitate the group.

In its final report in March, the panel recommended that Seibu Railway absorb Prince Hotels and part of Kokudo for the group's reconstruction. Kokudo has been the core of the group.

While the group tried to implement the recommendation, Seibu Railway shareholders criticized the plan for allowing Mizuho Corporate Bank as a major creditor bank to take the leadership in the group's reconstruction.

They also complained that the absorption of financially weakened Kokudo and Prince Hotels would not be favorable for Seibu Railway.

Kokudo and Prince Hotels were insolvent at the end of last March.

M&A Consulting Inc., an investment fund led by former government bureaucrat Yoshiaki Murakami, and U.S. investment banks Goldman Sachs Group Inc. and Morgan Stanley & Co. have made Seibu Railway acquisition offers.

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Source: Kyodo News International, Tokyo

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