Nintendo's Bandai bid back in the spotlight

The purchase of a minority shareholding in Japanese media giant Bandai by Nintendo in late September has come under scrutiny once again, as an interview in a Japanese magazine reveals in-fighting on the Bandai board over the sale.

Nintendo acquired 1.28 million shares of Bandai stock on September 18, an investment worth â'¬26.6 million at the going rate of the stock and representing a holding of 2.7 per cent. The Japanese business press speculated widely that this could be the preamble to a serious takeover bid by cash-rich Nintendo

Both companies moved to deny this speculation, with Bandai going so far as to hold a press conference in Tokyo to issue its denial, and several western news sources dismissed the speculation entirely on the basis that Nintendo's percentage holding was so small - not realising, perhaps, that the company's stock is massively dispersed, and there is currently no majority shareholder, with the son of the company founder, Makoto Yamashina, holding only 5.2 per cent.

Now an interview with Yamashina-san in well-respected Japanese business magazine Sentaku (translated and reported on by US website Gamespot) has revealed that there was more to this transaction than a simple investment after all, and that it has caused significant friction at board level within Bandai.

Yamashina claims that he was encouraged to sell Bandai shares to Nintendo by Bandai's own CEO and president, Takeo Takasu, in a private meeting in mid-August - a deal which would have given the gaming giant an additional 2 per cent holding in Bandai. Yamashina refused, seeing this as an attempt by Takasu to reduce his family's involvement in the running of the company.

Nintendo appears to have been working with UFJ Bank, an institution which provides corporate banking services to both Nintendo and Bandai, to secure a strategic holding in Bandai, and it was through this bank - which holds 6 per cent of Bandai's stock itself, including holdings belonging to UFJ Trust Bank - that Nintendo eventually purchased the 2.7 per cent holding which made it into one of the ten largest stakeholders in the media company.

Yamashina, who continues to oppose closer ties with Nintendo because of fears that it could damage the company's important relationship with Sony, points out that Bandai is currently considering a stock buyback program following a number of highly profitable quarters, and that logically it should have repurchased its own stock (which had just been released onto the market by US toy company Mattel) rather than allowing Nintendo to acquire it.

If Nintendo and UFJ really are plotting a strategic takeover of Bandai, they are already well on the way. Their combined stakeholdings in the company are thought to represent the single largest voting block of the highly dispersed stock.

Regardless of friction at board level, it appears that Yamashina-san - who is currently an outside director of Bandai - is somewhat isolated in his views on the transactions, and has failed to win wide support from the board. Whatever Bandai and Nintendo have planned is likely to proceed, although what form of partnership that may be remains to be seen. A closer working relationship between the two companies, at the very least, seems almost inevitable.