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Cablegate: Sapporo Rejects Steel Partners Takeover Bid

VZCZCXRO0912
OO RUEHFK RUEHKSO
DE RUEHKO #0546 0600936
ZNR UUUUU ZZH
O 290936Z FEB 08
FM AMEMBASSY TOKYO
TO RUEHC/SECSTATE WASHDC IMMEDIATE 2153
INFO RUEHBJ/AMEMBASSY BEIJING 1962
RUEHFR/AMEMBASSY PARIS 6002
RUEHUL/AMEMBASSY SEOUL 8024
RUEHFK/AMCONSUL FUKUOKA 6396
RUEHHK/AMCONSUL HONG KONG 6460
RUEHOK/AMCONSUL OSAKA KOBE 0064
RUEHKSO/AMCONSUL SAPPORO 7001
RUEHBS/USEU BRUSSELS
RUEHGV/USMISSION GENEVA 3260
RUEHIN/AIT TAIPEI 6912
RUCPDOC/DEPT OF COMMERCE WASHINGTON DC
RUEATRS/TREASURY DEPT WASHDC
RUEAWJA/JUSTICE DEPT WASHDC

UNCLAS TOKYO 000546

SIPDIS

SENSITIVE
SIPDIS

DEPT FOR EAP/AMBASSADOR HASLACH
ALSO FOR EAP/J AND 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 REJECTS STEEL PARTNERS TAKEOVER BID

REF: A. TOKYO 324

B. TOKYO 408

Sensitive but Unclassified. Contains Proprietary Information

1. (U) Sapporo Holdings, Ltd.'s board of directors February
26 announced it had rejected U.S.-based investment fund Steel
Partners' $1.4 billion tender offer to acquire 66.6 percent
of the company's shares. The board's announcement did not
signal whether the company intended to implement formal
takeover defense measures to dilute Steel's 19 percent stake
in the company, Japan's third-largest beer and beverage
maker. Sapporo's board based its decision on a February 5
report by a company-appointed advisory committee that
concluded Steel's offer was "not in the best interests of the
company or its shareholders" (Ref A). Sapporo's shares were
trading February 29 around 800 yen, three percent below
Steel's bid of 825 yen per share.

2. (SBU) Steel Partners has not yet responded publicly to
the board's announcement, but the fund had been clearly
angered by the advisory committee's report, which claimed
Steel had not provided sufficient information about its plans
for the company after acquiring control. The report also
charged the fund with secretly planning a two-stage "squeeze
out" takeover that could result in financial damage to
minority shareholders. A February 13 letter from Steel's
Managing Partner to the Sapporo advisory committee refuted
the charges by noting that Steel, at Sapporo's request, had
submitted in December 2007 a 125-page plan on how to enhance
the firm's corporate value that set out Steel's long-term
strategic vision for the company. The letter also reminded
the committee the fund had given repeated written assurances
that, if it decided to go ahead with a bid for the entire
company, it would offer the remaining shareholders a price no
less favorable than its current bid. One of Steel Partners'
executives told Econff February 23 that the fund believes
Sapporo never intended to negotiate seriously with Steel and
was only using its "advance warning system" defense as a
delaying tactic.

3. (SBU) Unless Sapporo takes measures that dilute Steel's
shareholdings, the fund's legal options seem limited. In our
view, if it wishes to pursue the takeover bid, it would
probably need to seek support directly from shareholders by
means of a proxy fight before the company's June annual
general meeting.
SCHIEFFER

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