TCI Says It’s No Threat To Japanese Security

Feb 21 2008 | 7:35am ET

Can an activist hedge fund be a threat to national security? The $10 billion Children’s Investment Fund doesn’t think so, and it is prepared to go to court to prove it.

The British hedge fund firm said it planned to take the Japanese government to court if it is prevented from increasing its stake in the country’s largest electric utility. The firm asked last month for permission to boost its 9.9% stake in Electric Power Development Co., known as J-Power, to as much as 20%. But Japan’s Ministry of Economy, Trade and Industry has postponed a decision until mid-May to probe TCI’s intentions.

In Japan, foreign investors must receive permission to buy more than 10% of a power company.

“The world is watching this,” TCI’s John Ho, who said he believes his firm’s request will eventually be approved, told Reuters. “How can we be a national threat? It doesn’t make sense.”

If METI rejects TCI’s bid, Ho added, “We will challenge it in all available domestic and international jurisdiction. We are not going to go away.”

TCI has complained about J-Power’s dividend and stock performance, and is seeking representation on the company’s board.

Japan has not been friendly territory for activist investors. Last year, New York hedge fund Steel Partners was branded an “abusive acquirer” in its bid for condiment maker Bull-Dog Sauce Co. The court allowed Bull-Dog to implement its poison pill provision, successfully diluting Steel Partners’ voting stake.

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