YAMAHA JUGGLES SHARES TO FIGHT OFF TAKEOVER BIDS
May 22 2007.

Yamaha Corp. is set to reduce its stake in Yamaha Motor from 22.7% to 14.9% by selling shares to Mitsui & Co. and other concerns, to end its need for equity-method accounting, Yamaha Motor has decided to acquire 5% of Yamaha Corp. in a cross-shareholding relationship.

In a joint press conference on May 21, Yamaha Corp. President Shuji Ito and Yamaha Motor President Takashi Kajikawa emphasized the positive effects of cross-shareholding in increasing the value of their "shared Yamaha brand."

Of the 27.9 billion yen Yamaha Corp. reported in consolidated net profit for fiscal 2006, about 60%, or 17.5 billion yen, came from its Yamaha Motor holdings. The ratio has grown from about 20% three years ago, tracking the expansion of Yamaha Motor's business.

When late President Genichiro Kawakami took Yamaha Corp. into the motorcycle industry, Yamaha Motor was born. Yamaha Motor's sales grew worldwide, reaching 1.58 trillion yen for fiscal 2006, nearly three times those of Yamaha Corp. Yamaha Motor's total share value is 850 billion yen, against 550 billion for Yamaha Corp. This distorted capital relationship would allow a small fund to acquire both Yamaha Corp. and 22% of Yamaha Motor.

With the May deregulation of takeovers of Japanese firms by foreign firms through their Japanese subsidiaries, the number of mergers and acquisitions will likely increase. In planning to propose an anti-takeover defense carrying the nature of a warning at its June shareholders meeting, Yamaha Corp. was seeking a partner to enhance its strategic alliance with Yamaha Motor.

"We have considered several firms for this over about two years," said Kajikawa.

First on the list was Toyota Motor Corp., Yamaha Motor's second-largest shareholder, at 4.4%. The companies set up capital ties in 2000. The automaker made Yamaha Motor a partner in developing the Toyota 2000 GT sports car, and uses its engines in the Crown and other passenger cars.

Toyota was interested in Yamaha Motor because attracting young customers is a high priority. But following the December 2005 inspections of Yamaha Motor by the Ministry of Economy, Trade and Industry on suspicion of violating the Foreign Exchange and Foreign Trade Control Law related to exports to China of remote-controlled helicopters with possible military applications, "any deal concerning stock transactions have returned to square one," said a Yamaha Corp. executive. The issue closed in March, with Yamaha Motor suspending exports of remote-controlled helicopters for nine months.

On becoming chairman in June, Ito sought a resolution to financial restructuring measures and began selling off resort facilities.


Source: The Nikkei Business Daily Tuesday edition