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Tuesday, March 27, 2007

16 billion yen puts Fujiya in hands of Yamazaki

Staff writer

Yamazaki Baking Co. will purchase a 35 percent stake in Fujiya Co. for about 16 billion yen, making it the scandal-tainted confectioner's biggest shareholder, the two companies said Monday.

The purchase will cement a long-term commitment between Yamazaki and Fujiya as they try to prevent Fujiya's woes from damaging the sweets industry. It will also allow Yamazaki to transfer some of Fujiya's cake-making expertise to its own operations.

According to the statement, Fujiya will issue about 68 million new shares to Yamazaki for 235 yen per share, a significant discount off Fujiya's closing price of 288 yen Monday.

This will give Yamazaki greater say at shareholders' meetings as it tries to return Fujiya, which will be an official member of the Yamazaki group, to profitability within three years.

Yamazaki has been assisting Fujiya with quality control since February, a month after the confectioner admitted using expired ingredients, including milk and eggs, in its products. Thus what began as a rescue operation has now become a capital alliance.

"Yamazaki Baking and our company agreed to this capital cooperation to further increase our business values by integrating the knowhow of the confectionery business the two companies have," Fujiya President Yasufumi Sakurai said in a joint news conference with Yamazaki.

Yamazaki President Nobuhiro Iijima was more straightforward. He said helping Fujiya was initially aimed at preventing the public from losing total confidence in the industry.

"If the incident blew up, we feared it would damage our business as well," Iijima said.

After inspecting Fujiya's operations, Iijima said he now believes the company's technological expertise in cake-making would benefit Yamazaki's own baking enterprise. But he also said he would try to make Fujiya profitable within three years.

Iijima hinted that Yamazaki might restructure Fujiya's cake operations, including shutting some of its five factories.

Fujiya will also boost the size of its board to 12 members, including two outside directors. Of the remaining 10, five will come from Yamazaki and five from Fujiya, with Sakurai and another board member having the right to represent the firm. Yamazaki will also send an auditor.

Fujiya will use 5 billion yen of the capital to bolster its quality control systems and another 4 billion yen to strengthen its franchise business.

The remaining 7 billion yen will be used to "reinforce its business basis," it said.

Fujiya has been strapped for cash since the scandal broke and halted its production. It has downgraded its forecast for the 2006 business year to a group net loss of 6.7 billion yen.

The two sides formally decided on the agreement in directors' meetings Monday.

Fujiya resumed cake sales at some outlets Friday.

In a separate move, two Fujiya directors, Masaro Fujii and Yoshiro Fujii, members of the Fujiya founding family, resigned for personal reasons, Fujiya said. They are cousins of former Fujiya President Rintaro Fujii.

Some observers claimed Fujiya's food safety problem stemmed from the fact that the founding family dominated its management, leading to a lack of corporate governance.

The resignations are seen as a move to sever ties with the founding family.

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The Japan Times

Article 3 of 9 in National news

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