Pickens, Rejected by Koito Directors, Blasts ‘Japan Inc.’ : Wonders if He Was Denied Seats on Board Because He’s a Foreigner
In another round of his high-profile fight against insular “Japan Inc.,” American corporate raider T. Boone Pickens Jr. made an unsuccessful bid Thursday to obtain seats on the board of Koito Manufacturing Co., the auto parts maker that he acquired a major stake in earlier this year.
Flanked by a Japanese lawyer who doubled as his interpreter, Pickens made a dramatic appearance at Koito’s annual shareholders meeting and demanded that he and two associates be made directors of the company. Pickens, who bought 20.2% of Koito’s shares in March in an unfriendly acquisition widely perceived here as a “greenmail” attempt, had been snubbed by management in previous overtures.
“I’m beginning to wonder if the reasons I’m denied this right (to have seats on the board) is because I’m not Japanese,” Pickens told the Koito board. He assailed the “insular structure” of the Japanese business world and delivered a message heavy with political overtones.
“You invest freely in my country, the United States,” he said, “yet I invest in Japan and am excluded. Trade and investment opportunities between our countries are simply not a two-way street. Japan should not be surprised at the frustration much of the world has with its cloistered system.”
Annoyance From Gadflies
Koito President Takao Matsuura struggled to preside over the 3 1/4-hour meeting, which was punctuated with shouts and heckling, long-winded speeches and nuisance questions by sokaiya , as Japan’s peculiar brand of underworld corporate gadflies are known.
But the serious disruptions feared by management did not occur. Nor did the sokaiya attempt to embarrass the company by stopping Pickens from speaking, as some observers had predicted.
The last time a foreigner made a serious attempt to speak at a shareholders meeting was in 1985, when sokaiya shouted down a representative of a U.S.-British joint venture attempting a hostile takeover of Minebea Co., a major ball bearing manufacturer.
The five sokaiya who addressed Thursday’s meeting, most of them associated with the group Sogyo Kokokai, posed as concerned investors loosely allying themselves with Pickens in advocating shareholder democracy. They scolded management for failing to return corporate profits to investors in the form of dividends and for neglecting to instruct company employees to say “good morning” as shareholders arrived for the meeting.
Toyohisa Eto, reputed leader of the ultra-rightist organization Nippon Seinensha, launched into a rambling discourse implying that Koito’s standoff with Pickens was somehow akin to the unethical corporate behavior witnessed in the recent Recruit Co. stock scandal, and also had something to do with the ruling Liberal Democratic Party’s plan to liberalize agricultural imports under foreign pressure.
Pickens, 61, told a news conference after the meeting that it was “the most unusual shareholder meeting I’ve ever attended in my life.” But he added that he thought the sokaiya asked some serious questions that had been left unanswered by management, “so the meeting was a sham.”
He contended that the meeting was packed with pro-management Koito employees.
Pickens’ proposal to name three directors to the board from Boone Co., the investment firm under which the shares are registered, was overwhelmingly rejected by voice vote at the end of the meeting.
Dodged Several Questions
Koito elected a new board of 20 directors, all but one from Koito management. The only outside director was from Matsushita Electric Industrial Co., which has a 5% stake in the company and has been represented on the board for most of the 30 years since it entered into a technical tie-up with Koito.
Koito’s officers dodged a series of questions submitted by Pickens on corporate practices and business plans, but Matsuura grudgingly conceded at a news conference after the meeting that the American was not to be taken lightly.
Asked whether he still regarded Pickens as a greenmailer, he said, “That’s a difficult question,” adding: “Mr. Pickens asked only very appropriate questions at the shareholders meeting.”
Matsuura said in a prepared statement that Koito from the beginning had dealt with Pickens and Boone Co. as though they were Japanese. “We will continue to respond to Mr. Pickens with the utmost courtesy and respect,” he said.
But Tamotsu Aoyama, Koito’s general manager for corporate administration and finance, suggested to reporters that Pickens was “using Koito for political aims.”
Pickens said at a separate news conference that he planned to testify on investment friction before the Senate Commerce Committee in Washington on July 11.
“There will be plenty of conversation about this (shareholders’) meeting in that hearing,” he said.
Wants Active Role
Pickens refused to answer questions about the financing he used to obtain his stake in Koito from Kitaro Watanabe, a Tokyo auto importer and real estate speculator whom Koito accuses of attempting greenmail twice last year. He reportedly bought 32.4 million Koito shares at 3,375 yen each for a total investment of $840 million.
Pickens insists he is a long-term investor interested in taking an active role in Koito management to improve its earnings and ultimately “to make money in the deal.” But sources close to Koito believe that he borrowed heavily to make the purchase and has little hope of recouping enough through dividend payments to pay the interest on his loans.
“We are of the view that Mr. Pickens is not long on cash,” a Koito source said.
Because selling his stock for capital gains would appear to be the only way Pickens can make a profit, speculation centers on whether Toyota Motor Corp.--the largest end-user of Koito’s headlamps and, until Pickens came along, the largest registered shareholder with a 19% stake--might come to the rescue.
Matsuura has said repeatedly that Koito will not involve itself in a buyback plan. Toyota will not comment on the matter, but local press reports say Japan’s largest car maker is still bitter about being greenmailed into buying back a block of shares of its historic parent, Toyota Automatic Loom Works Ltd., from a speculator group several years ago.
Pickens, meanwhile, denounced Koito for hiring the Japan office of Wasserstein, Perella & Co. and Blackstone Group, a New York investment bank specializing in mergers and acquisitions, to help defend itself against the supposedly hostile intentions of Boone Co.
“I know how expensive these guys are,” he said at the meeting, “and with Koito’s recent financial performance, you cannot afford to waste money fighting your own shareholders. After all, I am paying 20% of the bill.”