By Taro Fuse and Emi Emoto
TOKYO, Jan 15 (Reuters) - Seibu Holdings Inc applied on Wednesday to relist its shares on the Tokyo bourse, as the company starts negotiations with top shareholder Cerberus Capital Management LP over a proposed sale of much of the U.S. fund’s stake, sources said.
Such a deal would enable Seibu and the U.S. private equity firm to end a public spat over the turnaround and relisting of the embattled railway and hotel group that has been seen as a test of Japan’s openness to foreign capital.
People familiar with the matter told Reuters that Seibu had submitted an application to the Tokyo Stock Exchange (TSE) for the public share sale.
At the same time Seibu and Cerberus are discussing a price for the latter’s stake, which could see the private equity firm sell the bulk of its roughly $1 billion holding, sources said, in what would be a rare success for a foreign investor in tradition-bound Japan.
The planned listing has been made possible by the stock market boom spurred by Prime Minister Shinzo Abe’s monetary and fiscal stimulus that allowed Seibu to return to financial health.
On Tuesday, sources had told Reuters that Seibu planned to list its shares early in the fiscal year starting in April. They also said that Cerberus this week expressed its willingness to sell up to 20 percent of the company, more than half its 35.48 percent stake, depending on the price.
The agreement to move ahead on the IPO and the prospect of the U.S. investor cashing out a big part of its stake follows a teleconference on Monday between Seibu President Takashi Goto and Cerberus Chief Executive Stephen Feinberg, sources said.
A Seibu spokesman said he “cannot make specific comments relating to preparations for the listing”, and a TSE spokesman declined to comment. A Cerberus Japan spokesman said the fund, as an investor, was not in a position to comment on Seibu’s actions.
Cerberus led a 2006 bailout of Seibu after its predecessor company was delisted over a false entry in its securities reporting.
Seibu had been pushing to relist as soon as possible, while Cerberus had wanted to see more changes in the company’s management and governance to secure a better price for the IPO, which had initially been envisioned for 2012.
The row had included a failed Cerberus bid to put former U.S. Vice President Dan Quayle on the Seibu board as part of its fight to gain more clout.
As they were preparing to seek an IPO in April 2012, Cerberus estimated Seibu was worth 1,100 to 1,400 yen ($10.60-13.50) a share, raising that valuation in October 2012 to 1,800 yen a share, one source said.
With the Tokyo stock market up nearly 80 percent since then, the U.S. investors now say Seibu is worth 2,000 yen a share or more, the source said, implying a market valuation for the company of more than 684 billion yen ($6.6 billion), another source said.
By contrast, Takashi Hiroki, chief strategist at Monex Inc brokerage, reckons Seibu is worth something like 400 billion yen. This reflects price/book valuations for listed transport companies and includes a premium to its net asset value of 264 billion yen given the company’s vast real estate holdings, he said.
The underwriters for the IPO are Mizuho Securities, UBS and Bank of America-Merrill Lynch, sources say.
The U.S. investor had demanded major changes at Seibu’s annual shareholders’ meeting last year.
Cerberus recommended that Seibu shut unprofitable local rail lines outside Tokyo or sell the Seibu Lions baseball team to increase its returns, despite local opposition that at one point saw a push in a local assembly to ban foreigners from owning land.
The U.S. firm also wanted half of the seats on an expanded board of directors, which would have included Quayle and former U.S. Treasury Secretary John Snow.
Seibu fought back, lobbying Abe’s right-hand man, Chief Cabinet Secretary Yoshihide Suga, his official appointments diary showed at the time.
Cerberus’s efforts failed at the June shareholders’ meeting, prompting Cerberus to say that Seibu was going against the thrust of the prime minister’s “Abenomics” programme to revitalise Japan’s economy.