JAPAN: Livedoor may sell stake to investors to raise capital
Livedoor will focus on media, online finance and business software to rejuvenate company
Taipei Times
Tuesday, March 14, 2006
Tokyo --- Livedoor Co, the Japanese Internet company charged with securities fraud, said it may sell a stake to outside investors after a raid on its offices triggered a 91 percent slide in market value.
"We've been approached by half a dozen potential sponsors, including financial companies and strategic partners," chief executive officer Kozo Hiramatsu said in an interview broadcast yesterday. "It's one of the options we have, including restructuring the company ourselves."
Hiramatsu, 60, is seeking to streamline Livedoor's businesses to focus on media, online finance and business software after advertising sales dropped as much as 50 percent in the wake of the investigation. Tokyo prosecutors raided the company's offices and founder Takafumi Horie's home on Jan. 16 on allegations the company misled shareholders during an acquisition and inflated earnings.
Under Horie, Livedoor's sales rose 13-fold to 78.4 billion (US$659.4 million) in five years, helped by acquisitions including a used-car dealership and construction firm.
Hiramatsu, who spent 13 years at Sony Corp at its overseas and the personal computer businesses, said negotiations are under way to end ties with Livedoor Auto Co, which sells used cars, and Dynacity Corp, a condominium developer.
Shares of Livedoor were offered at 56, down 15 percent from its March 10 close, as of 1:24pm on the Mothers section of the Tokyo Stock Exchange. Stocks can't trade until the number of buy and sell orders match, according to exchange rules.
Livedoor on Feb. 15 reported unaudited first-quarter net income rose more than 10-fold to 4.9 billion from 455 million a year earlier. The company reiterated its forecast for ?16 billion for the year ending Sept. 30, up from 15.5 billion a year earlier.
"It's very tough" to realize the forecast target now, Hiramatsu said, without elaborating. "We have to shrink to grow."
Livedoor had 3,400 employees, 47 subsidiaries and 62 billion in cash as of Dec. 31.
The new management last month announced a business strategy that narrowed the company's focus to three areas of media, which includes the Internet portal; finance that provides investment banking; and business solutions that offers software and networks.
In the year ending last September, Livedoor earned 83 percent of its 17.6 billion operating profit from financial services such as investment banking and venture capital business.
"Advertisement revenue fell 50 percent" at worst after the investigation became known to the public, he said. "Some are coming back, and I think we've hit bottom."
Hiramatsu is reshuffling the company's assets under the direction of Noriyuki Yamazaki, 34, who become Livedoor's representative director on Feb. 22.
The company also faces delisting on the Tokyo Stock Exchange.
The Nihon Keizai newspaper reported on March 10, without saying where it obtained the information, that a delisting may happen as early as next month.
"We've already factored in that risk," Hiramatsu said. "As one of the options, we may consider going public again."
Livedoor, which went public in April 2000, had a record market value of ?469 billion last year. The company has more than 220,000 shareholders, mostly individual investors.
"If our shares are delisted, it means our shareholders will have difficulty converting the shares into cash," Yamazaki said. "We would have to return as much as possible to our shareholders."
Hiramatsu also said he wasn't aware of plans by Fuji Television Network Inc, Livedoor's second-biggest stakeholder, to sue for losses on its shareholding. The Nihon Keizai reported on Friday that the broadcaster may sue Livedoor.
Fuji TV bought a 12.7 percent stake in Livedoor for about 147.4 billion last April to settle Livedoor's hostile takeover bid for a radio affiliate.
"Fuji Television hasn't contacted us" on the possible law suit, Hiramatsu said. "We're talking to each other regularly but we each have our views."
The Securities and Exchange Surveillance Commission on Feb. 10 filed a criminal complaint against Livedoor and its marketing unit for providing false information to shareholders during an acquisition. The companies also faced a separate allegation it overstated earnings.
Published: Tuesday, March 14, 2006
