TCI Makes Final Appeal Over J-Power Bid

May 12 2008 | 12:28pm ET

The Children’s Investment Fund last week made a last-ditch effort to keep its bid for a bigger stake in Japan’s largest power company alive.

The London-based activist hedge fund shop defended its effort to double its 9.9% stake in Electric Power Development Co., better known as J-Power, and warned that its rejection will have a chilling effect on foreign investment in Japan.

Such a rejection, which would be the first by the Japanese government, “will not only significantly harm the predictability of foreign investment into Japan, but will also send the message to the rest of the world that Japanese markets are closed,” TCI wrote in its appeal to the Japanese government.

Japan last month recommended that TCI drop its bid for J-Power after a government panel said the increase stake would be a threat to the country’s public order. Japan is set to order TCI to withdraw its bid on Wednesday, unless it is swayed by the last appeal.

TCI scoffed at the national security argument, arguing that the panel’s recommendation was based on “erroneous facts, flawed economic reasoning and misinterpretations of law.”

The hedge fund “has no intention to obstruct the stable supply of electricity,” TCI wrote, adding that “the acquisition of only 20% of shares in such a private enterprise may threaten Japan’s ‘public order’ is simply unrealistic.” TCI again offered to forego voting on any nuclear issues if it is allowed to boost its stake.

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