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Cablegate: Sapporo Holdings Panel Calls for Rejection Of

VZCZCXRO1403
RR RUEHFK RUEHKSO
DE RUEHKO #0324 0380644
ZNR UUUUU ZZH
R 070644Z FEB 08
FM AMEMBASSY TOKYO
TO RUEHC/SECSTATE WASHDC 1578
INFO RUEHBJ/AMEMBASSY BEIJING 1558
RUEHFR/AMEMBASSY PARIS 5976
RUEHUL/AMEMBASSY SEOUL 7618
RUEHFK/AMCONSUL FUKUOKA 5967
RUEHHK/AMCONSUL HONG KONG 6439
RUEHOK/AMCONSUL OSAKA KOBE 9636
RUEHKSO/AMCONSUL SAPPORO 6574
RUEHBS/USEU BRUSSELS
RUEHIN/AIT TAIPEI 6884
RUEATRS/TREASURY DEPT WASHDC
RUCPDOC/DEPT OF COMMERCE WASHINGTON DC
RUEAWJA/JUSTICE DEPT WASHDC
RUEHGV/USMISSION GENEVA 3240

UNCLAS TOKYO 000324

SIPDIS

SENSITIVE
SIPDIS

DEPT FOR EAP
ALSO FOR EEB/IFD/OIA:KAMBARA
DEPT PASS USTR FOR BEEMAN
USDOC FOR 4410/ITA/MAC/OJ/NMELCHER
JUSTICE FOR ANTITRUST DIVISION - CHEMTOB
TREASURY DEPT FOR IA/CARNES AND POGGI
GENEVA FOR USTR

E.O. 12958: N/A
TAGS: EINV ECON OECD JA
SUBJECT: SAPPORO HOLDINGS PANEL CALLS FOR REJECTION OF
STEEL PARTNERS TAKEOVER BID

REF: 07 TOKYO 03689

SENSITIVE BUT UNCLASSIFIED. PLEASE PROTECT ACCORDINGLY.

1. (SBU) Sapporo Holdings, Inc., the parent company of
Sapporo Breweries, announced February 5 that an independent
advisory committee it set up to analyze the February 2007
takeover bid (TOB) by U.S.-based investment fund Steel
Partners had determined the bid is not in the best interests
of the company. The committee, which consisted of two
academics and a former Fujitsu Corporation executive,
criticized Steel Partners for failing to provide details on
how it would manage the company after a takeover and how it
would recoup the costs of purchasing Sapporo shares.
However, the committee did not label the fund an abusive
acquirer. Sapporo's board now has until March 5 to respond
formally to Steel's bid. The view here is the board is
almost certain to reject the bid and implement a takeover
defense. End Summary

2. (SBU) The analysis by the committee of three outside
experts was part of Sapporo Holdings' "advance warning
system", which the company invoked after Steel Partners'
February 2007 tender offer for 66.6 percent of the company's
shares. Steel Partners is the Hokkaido-based firm's largest
shareholder with a 17.5 percent stake. In response to a
request from Sapporo's board, Steel Partners in November 2007
submitted a 125-page "Corporate Value Enhancement Plan"
analyzing the company's current business operations (to the
extent possible without the business proprietary information
that the company refused to provide) and making specific
recommendations on how to streamline Sapporo's existing brand
lineup, expand its core beer business and maximize the value
of the firm's extensive real estate holdings in central Tokyo.

3. (SBU) Comment: Steel Partners, after being tagged an
abusive acquirer in the 2007 Bull-Dog Sauce case (Reftel) has
made a concerted effort to explain its strategy for improving
the target company's operations. The rejection by Sapporo's
panel of experts of Steel's plan, therefore, may dishearten
potential investors since it confuses the role of
shareholders, who as owners have a right to set strategic
direction of the company, and the role of managers
responsible for day-to-day operations. The outcome of the
advance warning defensive mechanism in this case seems to
support Steel's charge that Sapporo was not interested in a
dialogue on improving the company's value, but rather was
looking for an excuse to reject the takeover bid.
DONOVAN

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