Steel Partners Japan Seeks Negotiations with Sapporo on Revised Proposal

Monday March 10 10:57 AM

"We believe that all of the Company's stakeholders would benefit from meaningful negotiations between the Company and SPJSF to enable it to increase its stake to 33.3% of the Company's outstanding voting rights," Warren Lichtenstein of Steel Partners wrote in the letter. "We also believe such discussions and a negotiated proposal that the Board would support would help to restore investor confidence in the Company and enhance the corporate value of the Company for all stakeholders."

SPJSF noted that under the revised proposal if shareholders are able to evaluate the offer and elect to tender their shares, SPJSF will still be a minority shareholder. "We believe that our revised proposal evidences our continued confidence in the Company's prospects as well as our ability to respond constructively," Mr. Lichtenstein stated.

SPJSF said the increased proposed purchase price is based on its analysis of the Company's Revised Medium Term Plan 2008-2009 and other information available publicly. SPJSF said it is prepared to upwardly adjust the new offer price if the Board provides documentation that reflects additional value, and that it was willing to execute a confidentiality agreement in order to review such non-public documentation.

SPJSF also asked that the Board publicly disclose its intentions regarding any measures it may take if SPJSF seeks to increase its ownership position in the Company above 20% without the Board's support. Mr. Lichtenstein said he wanted to avoid the type of "unnecessary damage" caused to SPJSF and the other stakeholders when Bull-Dog Sauce Co., Ltd. implemented defensive measures, resulting in a 45% drop in shareholder value.

"We believe uncertainty on this point is not conducive to growing or preserving corporate value and can actually damage corporate value," he wrote.

SPJSF has been a long-term, supportive shareholder of Sapporo Holdings since 2004 and is currently the largest single shareholder with approximately 19%* of outstanding shares.

Full text of the letter:

              STEEL PARTNERS JAPAN ASSET MANAGEMENT, LP
                          24 FEDERAL STREET
                           BOSTON, MA 02110

March 10, 2008

Sapporo Holdings Limited (the "Company")
20-1, Ebisu 4-chome, Shibuya-ku, Tokyo 150-8522
Attention: Mr. Takao Murakami, Representative Director and President

        Steel Partners Japan Strategic Fund (Offshore), L.P. ("SPJSF")
                             P.O. Box 2681 GT, Century Yard, 4th Floor
                                        Cricket Square, Hutchins Drive
                                             George Town, Grand Cayman
                                   Cayman Islands, British West Indies

Re: Negotiated Transaction

As we indicated previously, it was not our intention to commence a
 tender offer bid without the support of the Company's Board of
 Directors (the "Board"). We are the largest long-term shareholder of
 the Company and are committed to working with the Company to enhance
 its corporate value. We continue to believe in the Company's
 prospects and that the best course of action is to effect a
 negotiated transaction. Therefore, we seek to immediately begin
 negotiating with the Board regarding an offer whereby SPJSF would
 seek an ownership position of 33.3% of the Company's outstanding
 voting rights (down from 66.6%) at an increased offer price of Yen
 875 per common share (up from Yen 825).

The increased price is based on our analysis of the Company's Revised
 Medium Term Plan 2008-2009 and other information available publicly
 or derived therefrom. SPJSF's proposed revised offer price of Yen 875
 per common share reflects what we believe to be an appropriate price
 considering the execution risk given the Company's difficulty meeting
 its business plan targets. We invite the Board to share with us any
 documentation in the Board's possession that it believes is not
 already known to us that reflects additional value. We are prepared
 to execute a confidentiality agreement as a condition to such review.
 If we find evidence of additional value, we are prepared to upwardly
 adjust the offer price to reflect such additional value.

In our revised proposal, we would seek to acquire only that number of
 shares that would bring our aggregate ownership position to 33.3% of
 the Company's outstanding voting rights. This reduction is in
 response to the Board's stated concerns, among them that SPJSF is
 seeking a control position while leaving minority shareholders. If we
 commence our proposed offer and shareholders are able to evaluate the
 offer and tender their shares if they believe the offer is
 attractive, SPJSF will still be a minority shareholder. We believe
 that our revised proposal evidences our continued confidence in the
 Company's prospects as well as our ability to respond constructively.

We are also prepared to negotiate other terms and conditions of the
 proposed transaction to provide the Board with comfort regarding our
 long-term commitment as a shareholder and how that is consistent with
 our policy on invested capital. We believe these discussions will
 lead the Board to conclude that our suggestions in our "Approach to
 Enhancing Corporate Value" are materially consistent with the
 Company's Revised Medium Term Plan. We hope that our revised proposal
 and related negotiations will alleviate any concerns that the Board
 may have had.

We believe that all of the Company's stakeholders would benefit from
 meaningful negotiations between the Company and SPJSF to enable it to
 increase its stake to 33.3% of the Company's outstanding voting
 rights. We also believe such discussions and a negotiated proposal
 that the Board would support would help to restore investor
 confidence in the Company and enhance the corporate value of the
 Company for all stakeholders.

If the Board is not willing to support our revised proposal or will
 not enter into meaningful negotiations with SPJSF, we believe that it
 is incumbent upon the Board to publicly disclose its intentions
 regarding any measures the Board may take if we decide to increase
 our ownership position in the Company above 20%. Given the
 unnecessary damage caused to both us and the other stakeholders of
 Bull-Dog Sauce Co., Ltd. ("Bull-Dog") when Bull-Dog implemented
 defensive measures, we believe uncertainty on this point is not
 conducive to growing or preserving corporate value and can actually
 damage corporate value. As the Board's members may recall, as a
 result of Bull-Dog's implementation of defensive measures, SPJSF was
 denied the opportunity to increase its ownership percentage of Bull-
 Dog, in fact, our ownership was involuntarily reduced through an
 issuance of share acquisition rights, and all stakeholders have
 suffered from destruction of corporate value that followed Bull-Dog's
 actions. Bull-Dog's market cap decreased from Yen 32.2 billion on
 June 15, 2007, the date on which we raised our tender offer price, to
 Yen 17.7 billion as of March 3, 2008 -- a Yen 14.5 billion, or 45%,
 drop in shareholder value in nine months.

The Board's stated philosophy is "to make people's lives richer and
 more enjoyable". We laud that view and believe that through clearer
 management focus and improved products, the Company can come closer
 to achieving that goal.

We look forward to your prompt response.

Respectfully,



Warren G. Lichtenstein

Copy to: Thomas J. Niedermeyer, Jr., managing partner
         Yusuke Nishi, representative director, Steel Partners Japan
          K.K.

*As of January 1st, 2007, SPJSF independently owned 17.52% of Sapporo Holdings' outstanding shares and 18.64% jointly.

Full text of SPJSF's letter can be found at www.spjsf.jp.

About SPJSF

Steel Partners Japan Strategic Fund (Offshore), L.P. is a long-term relationship/active value investor that seeks to work with the management of its portfolio companies to increase corporate value for all stakeholders and shareholders.

Contact:

PRAP JAPAN
Ian Messer / Masako Matsuoka, 813-3486-2931 (Japan Media)
financial@prap.co.jp
or
Steel Partners
Jason Booth, 310-941-3616 (US Media)
jason@steelpartners.com
or
Sitrick And Company
Tom Becker, 212-573-6100

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