It must have seemed like a good idea at the time. Instead KDDI’s ham-fisted efforts to acquire Japan’s largest cable company have left market-watchers slack-jawed.
The telco laid out $4 billion on January to buy a 37.8% stake in Jupiter Telecommunications (JCom), offering a hefty 60% premium. With 3.28 million cable customers, as well as fixed-line and mobile businesses, Jupiter offered the best available legup against incumbent NTT for mobile-only KDDI.
But there was a hitch. The deal breached Japanese securities law; a company seeking more than one-third of a company’s stock must make the same offer to all other investors.
KDDI settled by placing 6.7% of JCom stock in trust, reducing its direct holding to 31.1%.
Then Sumitomo, which owns 27% of Jupiter, got into the act. It said it would launch a 122.18 billion yen ($1.36 billion) bid – a 55% premium - to raise its shareholding to 40%, leaving KDDI as a generous but minor shareholder.
“Sumitomo’s takeover bid will undoubtedly be successful,” commented an industry source.
Sumitomo has been in this business since the 1980s and had set up and run JCom in partnership with US-based Liberty Global Inc in 1995.
The articles of incorporation of LGI/Sumisho Super Media, the LGI-Sumitomo joint venture set up in 2005, provided for the dissolution of the company in February 2010 if the two parties didn’t agree to extend the venture. Sumitomo had been negotiating to buy out LGI when KDDI swooped.