By Nathan Layne and Emi Emoto
TOKYO Jan 31 Japan's Seibu Holdings may hire executives recommended by Cerberus Capital Management LP in a sign the railway and hotel group is looking to mend fences with its biggest shareholder ahead of a planned IPO, people familiar with the discussions said.
Seibu applied earlier this month to relist its shares on the Tokyo Stock Exchange, sources have told Reuters. The offering could be worth more than $1 billion, making it one of the biggest in Japan this year.
The two sides were locked in a bitter public feud last year, when Cerberus, unhappy with management and its plan to go public at a price the fund felt undervalued the company, failed in an attempt to take control of Seibu's board.
While Seibu does not technically need Cerberus' blessing to press on with an IPO, a lack of cooperation would likely make the offering difficult. Hiring the executives, who would be involved in operations but not sit on the board, would signal to investors that Seibu was willing to work with the fund in an effort to improve performance, the people said.
The thawing in relations is the result of negotiations between Seibu President Takashi Goto and Cerberus founder Stephen Feinberg over the last month, the people said. They declined to be identified because the discussions are not public.
Seibu was delisted in 2004 in the wake of a disclosure scandal and Cerberus led its bailout with a $1 billion-plus investment. The U.S. fund currently owns 35.48 percent of Seibu and has one representative on the company's board.
The fund has not yet agreed to sell into the IPO, the people said. Sources have previously told Reuters that Cerberus could sell a stake of up to 20 percent, depending on the price. It paid 1,400 yen per share in a public tender offer last year but now believes the share price is worth 2,000 yen or more, the sources said, implying a market value of 684 billion yen ($6.7 billion).
A Seibu spokesman said nothing had been decided on potential hires, and declined to comment on its listing plans. Cerberus also declined to comment.
The relationship between the two has been viewed as a key test case of Japan's openness to foreign capital and the opportunities for investors to influence management.
Seibu has been eager to go public quickly to fulfil a pledge to return to the market after its delisting and give its shareholders an opportunity to cash out of their investment.
But Cerberus has pushed for governance and strategic changes first in the hopes of raising the value of Seibu's businesses, which include a large railway network in Japan, a vast property portfolio, and Prince brand hotels and resorts.
The handful of hires now under consideration include some executives who left last year as well as some new ones to offer expertise in its core businesses, the people said.
The list of candidates includes Stan Brown, 54, who was effectively ousted last year when Seibu did not put him up for reelection as a member of its hotel division board. Brown, a former Marriott executive, was also on the Cerberus slate of directors rejected by Seibu Holdings shareholders in June.
Brown could not be reached for comment.
Cerberus will be making some changes to its Asian and Japanese operations.
Louis Forster, a 15-year Cerberus veteran who was often the public face for the fund in its dispute with Seibu, is retiring as senior managing director and as chairman of Cerberus Asia Pacific Advisors Ltd, though he will stay on as an adviser.
Cerberus Japan K.K. will also see its chief operating officer Brian Saunders become co-president along with Terry Suzuki.