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Exclusive: Seibu to seek Tokyo listing, ends spat with Cerberus: sources

A crewman works inside a train coach of Seibu Railway Co., railway service unit of Seibu Holdings, at a station in Tokyo June 25, 2013. REUT
A crewman works inside a train coach of Seibu Railway Co., railway service unit of Seibu Holdings, at a station in Tokyo June 25, 2013. REUT

By Taro Fuse and Emi Emoto

TOKYO (Reuters) - Seibu Holdings Inc and top shareholder Cerberus Capital Management LP will seek to relist the Japanese company in the coming months, sources said, allowing the U.S. investor to cash out most of its $1 billion-plus investment and ending a spat seen as a test of Japan's openness to foreign capital.

The embattled railway and hotel group will seek a public offering on the Tokyo Stock Exchange early in the financial year starting in April, people familiar with the matter told Reuters on Tuesday.

The listing ends a public feud that had included a failed bid by the U.S. private-equity firm to put former U.S. Vice President Dan Quayle on the Seibu board as part of its fight to gain more clout.

Cerberus stands to make a tidy profit from what would be a multibillion-dollar listing, a rare victory for foreign investors in tradition-bound Japan. Seibu may file an application for the sale as soon as Wednesday, the sources said.

The listing has been made possible by the stock market boom spurred by Prime Minister Shinzo Abe's monetary and fiscal stimulus that allowed Seibu to return to financial health and not because it caved into the demands of Cerberus.

The 78 percent surge in Tokyo shares since Abe's election campaign began in earnest 14 months ago has unleashed a rash of market fund-raising, including the $4 billion July listing of Suntory Beverage and Food Ltd <2587.T>, Asia's largest of the year.

"In a way, without this market recovery, the fund could not have exited," said Japan corporate-governance advocate Nicholas Benes. It is not clear if the currently unlisted Seibu has taken steps to improve governance, but it is "logical" for Cerberus to cash out some of its investment, said Benes, who heads the Board Director Training Institute of Japan.

Cerberus will sell about 20 percent of the company, more than half its 35.48 percent holding, the sources said. The agreement follows an overnight teleconference between Seibu President Takashi Goto and Cerberus Chief Executive Stephen Feinberg, they said.

The Asahi Shimbun reported on Sunday that Seibu would seek a relisting. The plans by Cerberus to sell off much of its stake have not been previously reported.

A Seibu official said the company had no comment "about matters related to listing due to legal restrictions. The timing of listing is undecided." A Cerberus official also declined comment.

CULTURE CLASH

The Japanese company had been pushing to relist as soon as possible, while the U.S. investors wanted to see more changes in the company's management and governance to secure a better price for the IPO, which had initially been envisioned for 2012.

Companies typically list their shares two to three months after submitting their application, but this listing could take a bit longer. A source familiar with the deal said Seibu will likely relist in the April-June quarter.

The underwriters for the IPO are Mizuho Securities, UBS and Bank of America-Merrill Lynch.

Cerberus, which led a 2006 bailout of Seibu after its predecessor company was delisted over a false entry in its securities reporting, clashed publicly over the terms of the listing. The two companies stopped talking for about a year until mid 2013, when the U.S. investor demanded major changes at Seibu's annual shareholders' meeting.

Cerberus told Seibu to shut unprofitable local rail lines outside Tokyo or sell the company's Seibu Lions baseball team to increase its returns despite local opposition that at one point saw a push in a local assembly to ban foreigners from owning land.

The U.S. firm also wanted half of the seats on an expanded board of directors, which would have included Quayle and former U.S. Treasury Secretary John Snow.

Seibu fought back, personally lobbying Abe's right-hand man, Chief Cabinet Secretary Yoshihide Suga, his official appointments diary showed at the time.

Cerberus's efforts failed at the June shareholders' meeting, prompting Cerberus to say that Seibu was going against the thrust of "Abenomics."

(Additional reporting by Chikafumi Hodo; Editing by William Mallard and Matt Driskill)

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