Supporting Livedoor?

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There’s been a huge business story here in Japan for the last month or so to do with a company called Livedoor. It’s an ISP, portal, venture capital ‘internet’ company run by a man called Takafumi Horie. The company first sprang to attention a few years back as a free ISP, and not a bad one either as I remember. From these roots Horie has started to build himself a collection of companies and has generally made a fair amount of money out of them – he’s even written some best selling books on how to do it. The thing is, he’s young, dropped out from Tokyo University, doesn’t wear a suit, or even socks apparently, and he’s sticking his business nose in where it’s not wanted by the Establishment.

Last year, he tried to buy a baseball franchise but failed because the other owners clubbed together to exclude him, and instead, a rival internet company (and one much more respectful to the older orders) called Rakuten got the deal. That said, he got a lot of popular support, and a lot of free airtime from the campaign.

This year, he’s back and has decided he wants a radio station – NBS (Nippon Broadcasting System in English) – the problem being that it’s part of the FujiSankei Group via the great co-ownership system in Japan, which protects the group from outsiders. As a group they’re rather conservative, and amongst other things, own the Sankei newspaper and Fuji TV.

Anyway, Horie started buying shares in NBS, which was rated far below it’s real value (Motley Fool does a nice explanation here), both on the exchanges, and in ‘off-hours’ trading, a legal, but apparently not ‘friendly’ way to buy big blocks of shares. Consequently Horie amassed a sizable interest in NBS before Fuji TV realised what was going on. Knocked back on their heels by this fast, young, T-shirt wearing upstart, the old men in their dull gray salaryman suits did what all companies in this situation would do – they went crying to their friends in the government who promptly decried Horie’s (legal) methods, and have decided to change the law.

The press coverage has been poor generally, with lots of diagrams printed out (Japan TV loves print outs as opposed to graphics), and more commentary on Horie’s sports cars and jeans than on the specifics and rationale behind his takeover bid. Of course, none of this appears on Fuji TV news very much – nothing to see here, please move along.

So far all opposition has been emotional – “he’s wrong, he doesn’t understand, he’s not showing respect”. No one really has a good reason *why* he shouldn’t be allowed to own a radio station. The exception was a great clip I saw on Hokkaido TV, where the interviewer asked if he [Horie] understood journalistic talent and their way of working; he said he did and supported quality impartial reporting. Horie was then asked if he would play more music he liked if he got NBS. Horie was not amused and said so. Silence on set.

The spin in much of the media is very much ‘don’t trust this man’, with the Fuji TV President constantly on TV explaining why this just isn’t right.

Interestingly, many back Fuji TV not because they think they’re right, but to keep on their good side, and for fear that Horie might lose, and they don’t want to be on a losing side, principle be damned. Though I’m sure Horie realises that even if he doesn’t get NBS, like the baseball team attempt, he’ll get mindshare and support from the Japanese people.

You might say “but this is business!”, but the answer is that this is very much Japanese business. There are relationships here, there are unwritten rules – mainly because if you were to write them down, they’d sound odd and rather non-competitive. However, not all the established big businesses are against Horie. Toyota Motor Corp. owns some NBS stock and said it wouldn’t sell to either party. This is even more interesting because Toyota’s chairman, Hiroshi Okuda, also heads the powerful Nippon Keidanren (Japan Business Federation) and they haven’t come down on either side. He did however, criticise FujiSankei for not protecting themselves properly from potentially hostile takeovers.

NBS for their part, has come up with a great solution – stock splits with all the new shares being sold to Fuji TV for well below market value (probably the same ‘below market value’ Fuji TV is offering other investors – to the battle cry “stop the new guy!”). Livedoor is now threatening legal action on this partly because it is technically very dubious legally, but also because it harms Livedoor as a shareholder – and all the other shareholders.

Another angle on something which really shouldn’t have all these angles, is the cry from certain newspapers about Lehman Brothers being an investor in Livedoor whilst this take-over attempt is occurring. Some in Japan see this as ‘foreign ownership by the back door’, and have portrayed Horie as a lapdog of a huge American company. Strange, as I never saw Lehman as being that interested in radio before. Of course they’re not, this is merger and acquisition, and that is something they’re rather experienced in.

So it goes on, and as the title of this post implies, I somewhat support Horie – if only because he should be allowed to conduct business as he, and the law, see fit, without worrying if a company might go running for government protection every-time he attempts to engage in capitalism. It’s also a worrying message for foreign investors in Japan, about whether you’re up against your target, or against it, and all of it’s friends, just because you’re not in the club. Time will tell.