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Friday, June 30, 2006

Hankyu-Hanshin rail merger gets shareholders' approval


Staff writer

OSAKA — Shareholders of Hankyu Holdings Inc. and Hanshin Electric Railway Co. separately voted Thursday to approve the merger of the two longtime rivals at their annual shareholders' meetings.

News photo
A Hanshin Electric Railway Co. shareholder wishes the firm good luck Thursday as he arrives at its general shareholders' meeting. KYODO PHOTO

The move — the first postwar merger of private railways — will lead to the creation of the Kansai region's largest private railway and Japan's third-largest in terms of sales.

At its meeting in Amagasaki, Hyogo Prefecture, Hanshin Electric executives began by apologizing for the company's involvement with an investment fund operated by Yoshiaki Murakami, the bureaucrat-turned-financier charged last week with insider trading. Until mid-June, the Murakami fund was Hanshin Electric's top shareholder, with a stake of roughly 47 percent.

On Thursday, the executives promised the tieup with Hankyu means a higher stock price, a stronger management structure and no name or location change for the Hanshin Tigers baseball team.

On June 20, Hanshin and Hankyu executives announced that Hankyu Holdings's public tender offer had succeeded and that it would acquire a 63.71 percent stake in Hanshin for 249.8 billion yen.

The two railways, which are in especially fierce competition on routes linking Osaka and Kobe, agreed to create a new holding company — Hankyu Hanshin Holdings — on Oct. 1.

"Our involvement with the Murakami fund created great concern among stockholders, for which we apologize," said Hanshin Electric President Kyoji Nishikawa. "Many of you are worried about our involvement with Hankyu. But the merger will create a more stable corporate structure and will increase our stock value."

Several questions asked by the 807 stockholders in attendance Thursday dealt with how rail service will change and what the long-term plans are for train lines and stations, especially in the Kobe-Osaka region, where Hanshin and Hankyu lines run close to each other.

Nishikawa said those questions would be addressed once Hankyu Hanshin Holdings came into being.

One stockholder asked whether the merger would mean the Tigers would be renamed the Hankyu Tigers or the Hankyushin Tigers. But Hanshin executives said the agreement with Hankyu recognizes that a name change is impossible, and that there weren't any plans to move the team from Koshien Stadium, which sits on the Hanshin line.

Asked to explain how Hanshin got involved with the Murakami fund, Nishikawa said it was approached by the fund's managers last year and told that while the firm's finances were solid, its stock price was weak. Hanshin executives agreed, and the fund acquired a 47 percent stake in the railway.

Murakami's arrest, however, panicked individual shareholders, who make up about 30 percent of all of Hanshin's investors.

Meanwhile, at Hankyu's meeting in the city of Osaka, some shareholders took the company to task for not providing a sufficient explanation of how the merger will benefit the company.

In reply, President Kazuo Sumi said: "We will grow even more competitive, and that will improve our corporate value."

Information from Kyodo added



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