Clearer signal

BUSINESS
Business in Japan

Jan 20th 2005 TOKYO
From The Economist print edition

Fuji TV awards another victory to Japan's active investors

IN JAPAN, where cross-shareholdings and wacky ownership structures abound, any progress towards common-sense capitalism surely warrants cheers. The pace at Fuji TV, it must be admitted, has been a lot slower than the Formula 1 races that it regularly broadcasts to Japanese viewers. But on January 17th, Fuji TV finally announced a tender offer that will tidy up its cross-holding arrangement with Nippon Broadcasting System (NBS), a radio broadcaster, and take NBS under its wing as a normal subsidiary. This plan should help Fuji TV to resolve a long-running argument with investors, and hopefully allow it to focus more attention on its strategy as digital broadcasting spreads in Japan.

Other investors have complained for the past couple of years about the 22.5% stake that NBS holds in Fuji TV. Until recently, that stake was worth more than NBS's market capitalisation, implying that the rest of the NBS business had negative value. One investor who saw an opportunity was Yoshiaki Murakami, a former bureaucrat who now heads M&A Consulting (MAC), an investment outfit that has found easy pickings among wasteful cash-rich firms. MAC started buying NBS shares in 2003, eventually becoming its largest investor with an 18.6% stake, then badgered the two firms to resolve their cross-holding mess.

Fuji TV, which already owns 12.4% of NBS, will pay a 21% premium to buy (at least) a majority stake. It will issue ¥73 billion ($710m) in convertible bonds—it says, to help finance the deal. “We are basically happy,” says Kenya Takizawa, a partner of Mr Murakami at MAC.

But some of Fuji TV's investors are cautious. They are not sure why Fuji TV needs to issue new debt, especially bonds that could dilute their ownership. They also want to see if the firm will improve its business, now that it has cleaned up its finances, or whether buying off Mr Murakami will instead prove to be a case of unproductive greenmail.

Fuji TV launched some successful new dramas last year, and Masaru Ohnishi, a media analyst at J.P. Morgan, points out that it was Japan's ratings leader in all three main time segments. It is still looking for new ways to combine content from different bits of its media group, however, and is hoping to meet a growing demand for digital content in Japan, including high-definition broadcasting and content for video-equipped mobile phones. Mr Ohnishi reckons that Fuji TV will now be able to do more with Pony Canyon, an NBS subsidiary that distributes DVDs of Fuji TV's dramas, movies and other content.

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