The new offer comes after Sapporo last month rejected the initial offer of Ñ825 per share for a 66% stake in the company. Steel Partners currently owns 18.6% of Sapporo.
At Sapporo's equity base of 393,971,493 shares, and taking into account Steel Partners' current shareholding in Sapporo, the fund will spend another $494 million to achieve the 33% shareholding it is targeting.
Steel Partners has been a shareholder of Sapporo since 2004. In December 2005, Warren Lichtenstein, managing partner of Steel Partners, wrote to Sapporo saying that the fund had become the single largest shareholder in Sapporo and that it had a number of suggestions to ôunlock value and improve [the company's] return on capitalö. Among other recommendations, Steel Partners proposed Sapporo sell its soft drinks and restaurants divisions and separate its real estate businesses. Steel Partners has continued to try to engage Sapporo in dialogue since then.
In the intervening period, the Japanese company has taken some steps to create shareholder value including closing its Osaka brewery, finding a partner for its soft drinks business and bringing Morgan Stanley in as a partner in Yebisu Garden Place.
Steel Partners reiterated in its letter yesterday that it does not intend to launch a tender offer for Sapporo without the support of the Sapporo board. Steel Partners emphasised that it is now seeking a minority shareholding in Sapporo and that the revision in the offer price is based on an analysis of information in the public domain. Steel Partners indicated it would consider improving the price further if it is given access to information which ôreflects additional valueö.
Steel Partners asked the Sapporo board to ôpublicly disclose its intentions regarding any measures it may take if Steel Partners seeks to increase its ownership above 20% without the BoardÆs supportö, saying it is keen to avoid another Bull-Dog Sauce outcome.
The Bull-Dog Sauce saga, which played out in mid-2007, was finally resolved in JapanÆs Supreme Court in August and highlighted how strong the resistance is to activist-led change in Japan.
Steel Partners built up a 10.5% stake in the Japanese maker of Worcester sauces and then launched a tender offer to minority shareholders. Bull-Dog instituted an anti-takeover measure commonly known as a poison pill, whereby it issued warrants which diluted Steel Partners to 3%. Steel Partners took Bull-Dog to court where it was told it was an ôabusive acquirerö and a ôvulture investorö and the defence mechanism was upheld. The case then went to the Supreme Court, which upheld the lower courtÆs decision and Steel Partners had to concede defeat.
But the battle was costly for Bull-Dog as well and the company reported a loss for the nine months to December 31, 2007. It is forecasting a full-year loss as well.
Steel Partners wrote in its letter that ôall stakeholders have suffered from destruction of corporate value that followed Bull-Dog's actionsö and corroborated this by citing the 45% drop in market capitalisation of Bull-Dog between June 15, 2007, the day Steel Partners tabled an improved tender offer price to Bull-Dog shareholders, and March 2008.
The activist investor is obviously keen to avoid a replay of the Bull-Dog fiasco. Steel Partners not only did not achieve its objectives with respect to becoming a majority shareholder in the firm, but was also criticised for adopting a high-handed approach. Indeed, despite the court ruling being seen as a setback for shareholder-led reform in Japan by a number of commentators, comments were made that Steel Partners forced the issue to reach such a head.
Sapporo's shares closed up 2.45% in trading yesterday at Ñ792.
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