UPDATE 1-Private equity firm TPG interested in investing in Seibu-sources

Fri Jun 28, 2013 6:38am EDT

By Junko Fujita

TOKYO, June 28 (Reuters) - U.S. private equity firm TPG is interested in investing in Japanese conglomerate Seibu Holdings by either buying a stake from top shareholder Cerberus Capital Management or by acquiring new shares, people with knowledge of the matter said.

TPG sees potential value in Seibu's businesses, which include its Prince Hotel chain in Japan, and approached Seibu management earlier this year through an intermediary, according to the sources, who asked not to be named.

The contact took place before Cerberus launched an unsolicited bid to boost its stake in Seibu in March, the sources said. TPG would only make the offer if Seibu management agreed to its involvement, they added.

TPG declined to comment.

Seibu said this week it wanted to push ahead with what is expected to be a multi-billion relisting on the Tokyo stock exchange as soon as possible after blocking a bid by Cerberus to shake up management.

The emergence of another financial investor in the embattled Japanese property and railways firm could complicate efforts by Cerberus to shake up the management of Seibu, where it remains the largest single investor with a stake of 35.48 percent.

A spokesman for Cerberus said the private equity firm has no intention of selling its stake to a third party.

Seibu said in a statement that it was not planning to issue new shares and was not in a position to comment on the potential of a sale by Cerberus of its shares. A spokesman for the company said there had been no meeting between the two sides to discuss a potential investment.

It was not immediately clear whether the offer could proceed without the backing of Cerberus, which has a large enough stake to veto shareholder resolutions.

The issuance of new shares to TPG would also dilute the holdings of other investors, including state-backed lender Development Bank of Japan and Norinchukin Bank, the central bank for Japan's agriculture, forestry and fisheries cooperatives.

TPG, founded in 1992, is one of the largest private equity firms with $56.7 billion of capital under management.

Its global investments range from financial institutions, healthcare and medical companies to airlines and chipmakers. TPG's other holdings in Japan include top toy maker Takara Tomy, where it holds a 4.7 percent stake.

TPG in the past has offered to inject up to roughly $1 billion in both Olympus Corp, a medical equipment maker which sought outside capital to survive after an accounting scandal, and Japan Airlines Co. Neither offer resulted in a deal.

FRANTIC WEEK

In a frantic week at Seibu, shareholders voted down Cerberus's bold bid to secure 9 of 15 seats on Seibu's board, the latest in a raft public spats at Seibu.

The standoff between Cerberus and Seibu has been cast as a test of Japan's receptivity to foreign capital as popular Prime Minister Shinzo Abe promises to deregulate the economy to stoke growth.

Ceberus has demanded Seibu improve governance and earnings performance to ensure it gets a fair value for its shares when it is relisted.

Cerberus in March launched an unsolicited bid to boost its stake in Seibu from 32.4 percent to 44.7 percent to exert additional leverage over Seibu management. It was only allowed to increase its stake to 35.48 percent.

Still, the expanded holding is a big enough to allow Cerberus to veto decisions at future shareholder meetings.

Cerberus first invested in Seibu in 2006 and helped the company rebuild after it was delisted from the Tokyo Stock exchange for falsifying financial reports.

A number of individual investors in Seibu rallied to management's defence at this week's meeting, saying the U.S. fund could shut down Seibu's unprofitable local rail lines outside Tokyo or sell the company's Seibu Lions baseball team to increase its returns despite local opposition.

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