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November 29, 2005 10:08 pm

Anger over Asahi share issue

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Asahi Broadcasting, Japan’s second largest private TV company, has been accused by a US investment company that owns nearly 10 per cent of its shares of abusing shareholders’ rights through a proposed new share issue.

Liberty Square Asset Management, a Boston-based investment company, has written to the Japanese broadcaster accusing its management of seeking to protect their own positions at the expense of shareholders and demanding it cancel the offering.

The disagreement is part of a growing movement by activist shareholders in Japan – non-Japanese and Japanese – to put pressure on underperforming companies to reform or prevent management from undermining shareholders’ rights.

The clash is also the latest controversy to hit Japan’s broadcasting industry after a battle for control of Fuji TV and the recent row over the future of Tokyo Broadcasting. The TV sector is considered undervalued and strategically attractive.

Asahi Broadcasting, which is based in Osaka, Japan’s second largest city, has proposed issuing new shares worth Y7bn ($58m) to connected companies including TV Asahi, the Asahi Shimbun newspaper, and regional TV broadcasting affiliates, among others.

It said it needs the funds to pay for a new building and to cover a move into digital broadcasting.

Liberty Square, which owns 9.6 per cent of Asahi, argues the TV company does not need the extra Y7bn as it has Y15bn in cash and securities, generates Y6bn a year in operating cash flow and owns fixed assets that could be used to raise capital.

The letter continues: “Your plan to raise capital will be dilutive to existing shareholders, destroying value for those whose interests it is your mandate to protect.” It adds: “We believe it is your fiduciary duty to reverse course.”

The new share issue of 583,300 shares is equivalent to 16 per cent of the company’s outstanding stock. Asahi’s share price has dropped 20 per cent since the new share issue was announced.

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