Now, Act 2 of the Livedoor takeover drama has begun.
After obtaining management control of Nippon Broadcasting, Livedoor reportedly plans to increase its purchases of the Fuji shares currently held by Nippon Broadcasting to more than 25%. This would extinguish the voting rights in Nippon Broadcasting that Fuji acquired through its tender offer, effectively nullifying the effect of the tender offer. Because the total number of voting rights would also decrease, the possibility would arise that Livedoor could secure a supermajority of Nippon Broadcasting’s voting rights: more than the fraction whose denominator is 3 and numerator is 2. However, its voting rights in Fuji would not be restored.
Incidentally, Fuji’s market capitalization at yesterday’s closing price was about ¥586 billion, so this would require about ¥20 billion in funds. Livedoor must already have spent more than 80 billion on acquiring Nippon Broadcasting shares this time, so it will be interesting to see how it raises the funds.
Incidentally, Livedoor’s market capitalization is just over 200 billion. Its price-to-earnings ratio is 49 times, so it is considerably overvalued. Considering that the shares may be sold because of the MSCB, if they are valued at ¥200, that would put it at around ¥130 billion.
Now, how will Fuji respond?
(1) Take over the Fuji-Sankei Group shares held by Nippon Broadcasting → a plan to hollow out Nippon Broadcasting: the Fuji portion alone would be about 130 billion.
(2) Take advantage of a fall in Livedoor’s share price to acquire more than 25% of Livedoor shares: a purchase of about 35 billion. For the time being, acquire them from Lehman?
The latter would be easier to carry out, and Mr. Horie would surely dislike it.
# Or perhaps acquire all of the MSCB shares held by Lehman at once in after-hours trading…