Jan. 28, 2005 - TOKYO -- A Seibu group reform panel released an interim plan Friday for the scandal-tainted group's reconstruction urging Seibu Railway Co. to merge with a spinoff of the group's core firm Kokudo Corp. and absorb Kokudo's Prince Hotels chain.

The plan also calls for Seibu Railway to increase its capital by 150 billion to 200 billion yen before the merger.

It says the group should withdraw from or restructure some 40 of its 160 resort facilities, including hotels, and consider selling and other specific reform measures for the Seibu Lions professional baseball team.

Under the plan, Kokudo, an unlisted company running the Prince Hotels chain, will be divided in two, including the entity to merge with Seibu Railway.

The measure is designed to reduce former Seibu group leader Yoshiaki Tsutsumi's influence over the group, group sources said.

Seibu Railway will replace Kokudo as the core of the group.

Tsutsumi stepped down as Kokudo chairman in October but remains the company's largest shareholder.

Mizuho Corporate Bank and other banks are expected to take the leadership in reconstructing the Seibu group.

Naoki Hirano, 63, a former vice president of West Japan Railway Co. and a former official of the Ministry of Land, Infrastructure and Transport, has been picked as chairman of Seibu Railway.

Mizuho Corporate Bank Vice President Takashi Goto, 55, a member of the Seibu group reform panel, is set to take up the presidency of Seibu Railway to replace Terumasa Koyanagi who resigned Friday.

Hirano and Goto will become special advisers to the company Tuesday before assuming their respective posts.

Among ailing Seibu group companies, Seibu Construction Ltd. and OhmiRailway Corp. are subjected to reconstruction with support from Seibu Railway.

The panel, chaired by Ken Moroi, an adviser to Taiheiyo Cement Corp., has been considering how best to reform the Seibu group since Seibu Railway's stock price plunged last fall due to a scandal involving falsified financial reports. The company was delisted from the Tokyo Stock Exchange in December.

The panel is scheduled to map out a final package of reform measures in late March in collaboration with a council made up of major Seibu group company presidents.

After the envisaged reconfiguration, the group will aim to reduce its interest-bearing debt, totaling some 1.4 trillion yen, below 1 trillion yen while seeking to boost its consolidated pretax profit to 20 billion yen from the current 4 billion yen.

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