Japanese Internet firm Livedoor Co has bought almost 30 percent of radio broadcaster Nippon Broadcasting System Inc (NBS), putting at risk a $719 million bid for NBS by Japan's top TV network, Fuji Television Network Inc. Livedoor said it raised its stake in NBS to 35 percent by buying a 29.6 percent stake at market price through the Tokyo Stock Exchange's ToSNeT online trading system before the opening on Tuesday, which amounts to about $555 million at Monday's closing price of 5,990 yen.
Shares in NBS soared after the announcement, closing up 13.5 percent at a year high of 6,800 yen, 14 percent above Fuji TV's 5,950 yen per share bid, increasing the pressure on Fuji TV to either sweeten its offer or give up a plan to boost its stake in NBS from 12.4 percent to over 50 percent by February 21.
The emergence of an unsolicited shareholder for NBS, with a right to veto a board decision, could also scupper the giant media group's plan to adjust a capital structure under which the smaller NBS owns the biggest stake in Fuji TV.
"In order to raise its stake further, Livedoor may launch a hostile take-over bid on NBS. It obviously will have a big say on the Fuji TV group, influencing their strategy," said Yutaka Murakami, analyst at Mizuho Securities.
The move by Livedoor surprised both Fuji TV and NBS.
"We have no idea what Livedoor's intention is behind the purchase. We'll decide on whatever measures after their news conference," Fuji's Senior Executive Manager Masao Sakai said.
The purchase is the latest sign of a changing corporate culture in Japan. The emergence of hostile bids, like Sumitomo Mitsui Financial Group's $36 billion bid for UFJ Holdings Inc last year, is seen as proof that the backroom deals that characterised past mergers are in decline.
"The Livedoor move helps us understand what it will look like when a new tide of increased M&As by foreign investors affects companies and markets here from next year," Tsutomu Yamada, market analyst at Kabu.com Securities.
Japan plans to change its M&A rules in April 2006, enabling more cross-border mergers through share swaps.