Steel Partners Withdraws Bid to Buy 33% of Sapporo

Warren Lichtenstein’s Steel Partners withdrew its proposal to acquire 33 percent of Sapporo Holdings Ltd., citing a worsening performance by the Japanese brewer and the company’s refusal to negotiate with the fund.

Steel Partners, the biggest shareholder of Sapporo with a stake of about 19 percent, sent a letter today to the beermaker’s President Takao Murakami, stating its reasons for the withdrawal, the fund said in an e-mailed statement.

Steel Partners, an investor in Sapporo since 2004, has repeatedly urged Sapporo to boost returns by redeveloping property, reviewing its soft-drink unit and improving marketing of its beers, which include the Sapporo and Yebisu brands. The New York-based fund offered 875 yen a share last March to raise its stake in Sapporo to a third after the brewer implemented takeover defenses and turned down its year-old offer to buy a controlling stake.

“It is difficult to find fault with the decision by Steel Partners to take this action,” said Kirby Daley, senior strategist and head of capital introductions at Newedge Group in Hong Kong. “It is another example of corporate Japan’s insularity looking ridiculous to the rest of the world.”

Sapporo shares have declined 47 percent in the past 12 months, compared with the benchmark Topix index’s 43 percent drop. The stock fell 9.7 percent to 381 yen today before Steel Partners’ announcement.

Losing Market Share

“Unfortunately, Sapporo’s performance continues to deteriorate, negatively affecting shareholders and stakeholders who have watched the company’s prospects diminish and its share price drop lower and lower,” Lichtenstein, president of the fund, said in the letter, according to the statement.

Steel Partners cited Sapporo’s decline from the third-largest to the fourth-largest brewery in Japan, a loss of market share in the “super premium” beer segment, and the termination of Diageo Plc’s 44-year relationship with Sapporo to distribute Guinness brand beer in Japan, according to the statement.

The fund’s criticism was “regrettable,” Sapporo said in a statement to the stock exchange, adding it was studying the letter.

Steel Partners will vote against the re-election of Sapporo’s board and an extension of the firm’s anti-takeover measures at the company’s annual general meeting, the fund said in the statement.

Tokyo-based Sapporo last week forecast its net profit to decline 61 percent to 3 billion yen in the year ending Dec. 31 because of depreciation charges, losses from shedding inventories and an absence of profits from the sale of fixed assets.
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