Trafalgar, British Partner File Suit in Japan : Battle Heats Up for Control of Minebea

Los Angeles-based Trafalgar Holdings and its British partner have turned up the heat in their unprecedented hostile bid to take over Minebea Co. by filing a lawsuit in Japan and declaring their intention to buy up to two-thirds of the Japanese conglomerate.

In what has become the first hostile takeover battle between a Japanese company and a foreign operation, Trafalgar Holdings, headed by former Financial Corp. of America chief Charles W. Knapp, and Glen International, a London-based investment company chaired by financier Terrence Ramsden, had offered $1.4 billion in cash and securities. The board of Minebea, whose products include ball bearings and electronic parts, rejected the proposal.

“The gloves are off,” Knapp said in a telephone interview Tuesday. “We’re moving aggressively to gain control of this company.”

The Trafalgar partnership, called Trafalgar/Glen, filed suit Monday in Nagano District Court in Japan to block the proposed merger of Minebea and Kanemori Co., a clothing and jewelry retailer. Trafalgar contends that the acquisition of Kanemori, to become effective April 1, is intended to thwart the Trafalgar/Glen takeover attempt and “has no legitimate business purpose.”

The suit also seeks to nullify Minebea’s private placement of 16 billion yen (more than $84 million) in convertible bonds, a move that was announced in September.

More than 60% of the bonds were placed with Keiai Corp., a company controlled by Minebea President Takami Takahashi, while the remainder was placed with two banks that are major Minebea shareholders, the suit said.

The Trafalgar group said such a placement shows that the bonds, which are convertible into 20 million shares of Minebea common stock, were issued to dilute the partnership’s holdings rather than to serve Minebea’s normal financing needs, as the Japanese company has said.

The Trafalgar group said the suit is the first ever filed by a foreign entity to prevent the merger of two Japanese firms.

In Tokyo, Minebea executive Ryusuke Mizukami said this morning that the firm had not received official notice that a suit had been filed and would have no comment until it had been notified officially.

Separately, the Trafalgar group Tuesday filed with the Bank of Tokyo and various government ministries a notice of intention to buy more than 10% of Minebea’s outstanding stock. Knapp said the partnership plans to buy as much as two-thirds of Minebea’s common stock on the open market once the document is approved.

Japanese law requires foreigners to file such notice if they want to buy more than 10% of the shares of a Japanese corporation other than through the conversion of bonds or the exercise of warrants.

The Trafalgar group said this is the first time a foreign entity not already associated with a Japanese company has filed notice under that law.

Trafalgar/Glen is the registered owner of 14 million shares of Minebea stock. The group owns “significantly more” than that, Knapp said, but less than 22 million shares, which is 10% of Minebea’s outstanding stock.

The Trafalgar group also owns warrants and bonds convertible into more than 60 million additional shares, which would give the partnership an approximately 30% stake, fully diluted, if those warrants and bonds were converted.

Knapp said Trafalgar/Glen is interested in Minebea because “with Japan as the second-largest capital market in the world, we’re anxious to have ownership control of a Japanese company.”

Times staff writers Martha Groves in Los Angeles and Sam Jameson in Tokyo contributed to this story.