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Thursday, Feb. 7, 2008

'Gyoza' scare scuttles JT-Nissin frozen food ties

Staff writer

In a surprise announcement, Japan Tobacco Inc. and instant noodle maker Nissin Food Products Co. said Wednesday that due to the widening "gyoza" dumpling scare, they have scrapped plans to merge their frozen food divisions.

News photo
Hiroshi Kimura

JT President Hiroshi Kimura meanwhile denied that insider trading involving JT shares had occurred early last week, when the stock price fell and before a subsidiary announced it was recalling its frozen gyoza products.

JT decided not to go ahead with a November agreement to sell 49 percent of struggling frozen food maker Katokichi Co. to Nissin and then combine their frozen-food units.

JT built up its stake in Katokichi through a public tender offer that ended successfully in December. Then the food-safety scare surfaced last week, in which it was learned that 10 people had fallen ill after eating frozen "gyoza" dumplings contaminated with pesticide. The dumplings were made in and imported from China and sold by JT Foods Co., a JT subsidiary.

Voicing displeasure over JT's handling of the gyoza poisonings, Nissin Food President Koki Ando told reporters, "There was a difference (between Nissin and JT) in ways of thinking about food safety."

Kimura meanwhile said the plan was scrapped after Nissin pushed JT to either allow the noodle maker to hold a majority of Katokichi shares or scrap the merger.

"We bear the responsibility for the current (food poisoning) incidents as an importer," Kimura told a separate news conference. "If we allow Nissin to take the majority, it is like abandoning that responsibility . . . that is something we should never do."

Kimura said he, Ando and Katokichi's president met Tuesday after Nissin offered to hold talks on the merger.

They agreed it would be in the best interests of all three to scrap the merger, he said.

"It is regrettable that the idea of the three-company framework did not work out," Kimura said.

JT, which has 93.88 percent of Katokichi shares, said it will still proceed with its plan to make Katokichi a 100 percent subsidiary, although it will be flexible on the timing.

"The priority is to deal with the (food scare) situation at hand," Kimura said.

It was the first time the JT president has appeared at a news conference since the scare surfaced.

Asked why he had not appeared to explain the incident immediately after news broke of the poisonings, Kimura said senior executives in charge were more knowledgeable and therefore were considered more appropriate to speak to the media.

Reporters also asked about allegations that JT engaged in insider trading, after its shares tumbled 8 percent on Jan. 28, two days before it announced it was recalling the gyoza.

"The number of people who would have known of the problem was very few, and it is difficult to think there was insider trading," Kimura said.

Information from Kyodo added

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