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Steel Partners Loses Vote to Oust Sapporo Directors

Date: Tuesday, March 30, 2010
Author: Bloomberg

Steel Partners, the fund run by U.S. investor Warren Lichtenstein, lost a shareholder vote to oust directors from Sapporo Holdings Ltd., maintaining the five-year standoff between the Japanese brewer and its biggest investor.

About 70 percent of investors voted for the company-backed candidates over Steel Partners’ nominees, Sapporo President Takao Murakami told reporters after the shareholder meeting in Tokyo today.

The loss blocks Steel Partners’ attempts to force changes, including cutting production capacity and redeveloping property, that it says would help reverse declining sales and market share at the Tokyo-based brewer of Yebisu. Efforts by the activist fund, Sapporo’s biggest shareholder, to increase its influence have failed as the nation’s fourth-largest beermaker turned to takeover defenses and lobbied other investors.

“There’s nothing left for Steel Partners to do but gradually sell down its stake in Sapporo,” said Ichiro Takamatsu, chief executive officer at Japanese hedge-fund adviser Alphex Investments Co.

Sapporo fell 0.4 percent to 493 yen at the 3 p.m. close on the Tokyo Stock Exchange. The stock has gained 24 percent over the past year, matching the advance in the benchmark Topix index.

“Steel Partners will continue to take whatever steps it deems necessary to bring positive change to Sapporo,” Lichtenstein said in an e-mailed statement. The level of support for the fund’s candidates sends a “clear signal to the company that change is needed immediately.”

Board Nominees

New York-based Steel Partners had proposed replacing six of Sapporo’s 10 directors, with candidates including the fund’s executive Joshua Schechter, Yoshiharu Naito, former chairman of Japanese beverage maker Pokka Corp., and Yasuo Nakata, an adviser to Japanese snack maker Calbee Foods Co.

The fund held seven investor meetings across Japan this month, arguing new directors were required to revive the brewer.

Sapporo’s sales have slumped by a third during the past decade as Japan’s population ages, younger drinkers switch to wine and other beverages, and rivals steal market share. The company lost the No. 3 slot in the nation’s beer market to Suntory Holdings Ltd. in 2008. Sapporo’s share price yesterday was 11 percent lower than it was 10 years ago.

“All we can do is to boost our corporate value and share price” to end the standoff with Steel Partners, Murakami said. “We will keep making efforts to communicate closely with Steel Partners.”

Shareholder Support

Murakami met with domestic and overseas investors this month, and placed a video message on Sapporo’s Web site to counter Steel Partners’ campaign. Sapporo rejected the fund’s criticisms, pointing to cost reductions and improved marketing.

Steel Partners Japan Strategic Fund (Offshore) LP, which began investing in Sapporo in 2004, has reduced its holdings in more than a dozen Japanese companies in the past two years. Most of the fund’s efforts to force changes have been blocked as companies turned to so-called poison pills and friendly tie-ups.

The fund aimed to repeat the success last year when it won shareholder support to install a new board at Japanese wigmaker Aderans Holdings Co.

Sapporo’s net income fell 41 percent last year to 4.54 billion yen ($49 million) as sales declined 6.5 percent.

The brewer’s earnings are little changed over the past decade, compared with larger rivals that have expanded overseas and at home through acquisitions. Kirin Holdings Co.’s net income has gained about 50 percent over the past decade and Asahi Breweries Ltd.’s earnings have grown more than 11-fold.