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Top shareholder in Japan Airlines moving toward dumping shares

Posted on: Tue, 17 Nov 2009 11:44:00 EST

Symbols: TOKUF

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TOKYO, Nov 17, 2009 (Kyodo News International - McClatchy-Tribune Information Services via COMTEX) --
TOKUF | Quote | Chart | News | PowerRating -- Tokyu Corp., the top shareholder in struggling Japan Airlines Corp., is taking steps toward selling at least some of its holdings in the airline, sources familiar with the move said Monday.

Holding a stake in JAL "no longer offers synergies" to the businesses of Tokyu, a Tokyu executive said, as the conglomerate has been concentrating its management resources on its railway and real estate operations.

Tokyu has disposed of its travel business affiliate and a hotel operator, making it less meaningful for the company to retain equity holdings in JAL as a way to expand its travel business.

Tokyu's envisaged move comes as the future of JAL appears increasingly uncertain while it aims to restructure its loss-making operations under the control of the central government.

To secure funding necessary for restructuring, JAL is also widely expected to tap the capital market deeply. Tokyu may also be feeling wary of the possibility that the value of its holdings will be diluted as a result of new share issues.

As of Sept. 30, Tokyu held around 80.42 million common shares in JAL, or 2.94 percent of its outstanding shares. Tokyu was the top shareholder in Japan Air System, which merged with JAL in 2002, and became the biggest shareholder in the merged entity.

But it remains to be seen when and how Tokyu would dump its stake and how many shares it would sell. The JAL share price has been languishing at low levels, finishing Monday at 106 yen. Tokyu may well face liquidation losses if the price level remains low.

Tokyu Chairman Kiyofumi Kamijo stepped down as an outside director of JAL on Friday before his term expires.

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