UPDATE 2-KDDI questioned by regulators over J:Com deal

Tue Feb 2, 2010 7:18am EST

* Regulators asked about plan to get 38 pct J:Com stake-KDDI

* Says $4 bln deal in line with regulations

* Regulators asked KDDI to make public tender offer -media

* KDDI could face fine of more than $882 million -media

(Recasts; adds analyst comment)

By Mayumi Negishi and Taiga Uranaka

TOKYO, Feb 2 (Reuters) - Japanese telecoms firm KDDI (9433.T) said regulators had questioned it about its plans to buy a stake in Japanese cable TV network J:Com from U.S.-based cable operator Liberty Global (LBTYA.O) for about $4 billion.

Some legal experts have already raised doubts about the legality of the deal, which was announced last week, saying KDDI may need to make a public tender offer for Liberty's 37.8 percent stake in Jupiter Telecommunications Co (J:Com) 4817.Q.

Japanese law stipulates that there must be a public offering open to all shareholders when a buyer seeks to purchase more than a one-third stake in another company.

KDDI and its lawyers have maintained that because it plans to buy three unlisted Liberty units, which together hold 37.8 percent in J:Com, it does not need to make a public tender offer.

The Yomiuri newspaper reported on Tuesday the financial regulator had asked KDDI to make a tender offer or change the way in which it plans to buy the stake, or it could face a fine of more than 80 billion yen ($882 million).

KDDI spokeswoman Kayo Sekine said the firm had been questioned by Japan's Financial Services Agency (FSA) but declined to elaborate.

"We will cooperate if the FSA should make a formal request for information and adhere to any FSA guidance," she said.

Jun Yokoyama, a senior researcher at Daiwa Institute of Research, said that theoretically Japanese regulation does not require a tender offer if an acquisition does not directly target listed companies.

"If you follow the letters of the law, you can read it that way. But if you follow the spirit of the law, which is to protect interest of investors, it's not so clear whether it's OK just because they are not listed firms," Yokoyama said.

KDDI, which is trying to narrow the gap between it and top phone company Nippon Telegraph and Telephone Corp (9432.T), is seeking the J:Com stake to gain a stronger foothold in the country's cable TV industry. [ID:nTOE60O06F]

Sumitomo Corp (8053.T), which holds 27.7 percent of J:Com, has declined comment on KDDI's plans, while J:Com President Tomoyuki Moriizumi has said he will accept the deal if the purchase method is found to be legal.

Shares of KDDI have lost 7 percent since it announced the deal, while J:Com shares, which initially jumped on the news, have stayed flat. (Additional reporting by Nobuhiro Kubo; editing by Chris Gallagher and Karen Foster) ($1=90.51 Yen)

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