Daio Paper Corp. plans to commit up to 10 billion yen ($129 million) by March to buy up stock held by the founding family as a means of reducing its influence over company matters.
Mototaka Ikawa, the former chairman, was arrested in November on suspicion of aggravated breach of trust for borrowing billions of yen from group companies to pay off gambling debts.
The Ikawa family owns stock in 35 Daio Paper group companies and its influence over those subsidiaries was considered a major reason the loans were made without proper approval.
Daio Paper established a special investigative committee to look into the massive loans. According to a committee report, of the 35 domestic consolidated subsidiaries in the Daio Paper group, the parent company possesses a majority stake in only three. In the other 32 subsidiaries, the Ikawa family as well as family companies own a majority stake.
Seven of those 32 subsidiaries loaned Ikawa a total of 10.6 billion yen. Most of that money was used for gambling in Macao casinos.
Sources said Daio Paper officials had already begun negotiations with the Ikawa family for the purchase of the stocks in the subsidiaries. Officials have also gathered the funds needed for the acquisition based on the appraisal made by the special investigative committee.
Whether the negotiations proceed smoothly is another matter.
The Ikawa family also owns about 10 percent of shares in Daio Paper, mainly through holdings of family companies, but there are no plans to buy those shares, sources said.
Daio Paper was set to announce on Dec. 14 its financial statements on a consolidated basis for the six-month period ending in September 2011. The company was expected to record a special loss of several billions of yen because part of the money loaned to Ikawa that is unlikely to be repaid will be written off as losses.
In August, the company estimated a net profit of 200 million yen.
(This article was written by Akihiro Nishiyama and Ryo Shimura.)
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