JAPAN: Rakuten seeks disclosure order for TBS deals

Tokyo Broadcasting System's measure to increase number of shareholders only serves the interests of TBS board of directors, says Rakuten

The Japan Times
Thursday, June 7, 2007

By Kanako Takahara

Rakuten Inc. made another move to make Tokyo Broadcasting System Inc. its affiliate Wednesday when it petitioned the Tokyo District Court to order TBS to disclose its share transaction records.

The Internet shopping mall operator claims TBS has spent more than 90 billion yen on forming cross-shareholding ties with companies friendly to TBS to increase the number of friendly shareholders before its general shareholders' meeting on June 28. Rakuten is claiming the large number of cross-shareholdings is depriving others of the chance to acquire shares.

"We have come to believe (the TBS) measure to increase the number of friendly shareholders is an illegal attempt aimed at defending the interests of the TBS board of directors," Rakuten said. Rakuten is also trying to get its hands on proxy votes for the June shareholders' meeting so it can force TBS management to implement its ideas, which include appointing Rakuten President Hiroshi Mikitani as an outside board member.

It is the first time the court has been asked to get involved in the battle, which began in 2005. Rakuten Media Investment Inc., a Rakuten subsidiary, filed the petition.

Rakuten said it asked TBS on May 22 and again on May 28 to show its accounting records on TBS share trading for the five business years to this March, but TBS refused, saying some of its business partners are Rakuten rivals.

Under the law, a shareholder with a stake of 3 percent or more can ask for access to a company's financial records, although the firm isn't necessarily obliged to show them.

In mid-April, Rakuten, which has a 19.86-percent stake in the broadcaster, said it wanted to raise its stake to more than 20 percent to make TBS an affiliate.

TBS is opposed to the move because it doesn't want Rakuten to take over management.

At a news conference Wednesday, TBS President Hiroshi Inoue criticized Rakuten for accusing the company of "illegal" activities.

"I cannot understand why Rakuten, which claimed it wants to maintain and develop a good relationship with us, would make accusations that will damage our reputation," Inoue said.

He admitted the broadcaster has conducted cross-shareholding deals with companies it has business relationships with but claimed the deals are not illegal and TBS considers disclosure of the related trading information to be unnecessary because some of the shareholders are Rakuten rivals.

However, Inoue said TBS will disclose accounting records for stock trades that exceeded 400 million yen at the end of June.

He also said he met with Mikitani in March to persuade him to sell Rakuten's stake in TBS.

"I told him that if you buy a huge amount of shares and pressure for a business tieup, people (at TBS) won't be happy about it," Inoue said. "Mr. Mikitani said something about wanting to make TBS (Rakuten's) affiliate."

But Inoue said the overall atmosphere in March was amicable and the two promised to meet again in April. Then Mikitani suddenly called Inoue on April 19 to request a meeting just before Rakuten announced it intended to up its TBS stake and make it an affiliate, he said.

The struggle between the two companies began in October 2005, when Rakuten pressed TBS to merge with it after acquiring a large volume of the broadcaster's shares. Rakuten argues there are merits to merging TBS's TV broadcasting with Rakuten's Internet services.

Information from Kyodo added.