'Medical Check-Ups': Japan Firms Tap Banks for Advice as Activists Circle
" Reuters (07/19/18) Wilson, Thomas; Tomisawa, Ayai"
Japanese companies are increasingly hiring investment banks and public relations firms for advice on dealing with activist investors. Among those advising boards on how to engage such investors are Morgan Stanley and Bank of America Merrill Lynch. Japan was the top destination in Asia for activist campaigns last year, according to a report by JP Morgan, with investors focusing on low valuations and cross-shareholdings in the country. The growing number of firms seeking advice shows a shift is underway in Japan's attitude toward activists, from one of resistance to legitimate engagement. “It is like a regular medical check-up: we do it regularly for Japanese clients even before they are approached by an activist,” said Akihiko Manaka, head of Japan mergers and acquisitions at Bank of America Merrill Lynch. “We offer Japanese clients analysis to look at the industry benchmark in terms of financial statistics as well as corporate governance and shareholding structure.” A sense that executives are more prepared to listen is encouraging more activists to enter the scene, analysts said. And emboldened by the government's governance push, activists have become increasingly vocal in their demands for change. Seth Fischer, founder of Oasis Management, has over the past 18 months used more public tactics to push companies for change. “Every engagement starts soft but if we don't get meaningful dialogue, we escalate to writing letters, then setting up websites and maybe going as far as proxies and lawsuits,” he said. “Companies are engaging more and they're asking banks to help them figure out how to address our concerns, which hopefully means they'll meet us somewhere in the middle.”
Investors Smell Action at Germany's Top Bet
" Wall Street Journal (07/17/18) Wilmot, Stephen"
Thyssenkrupp has lost both its chairman and CEO in recent weeks, with both men indicating that they had lost key shareholder support. Cevian, which owns 18% of the company, and Paul Singer's Elliott Management, which announced a small stake in late May, are said to have pushed for a breakup but have not publicly laid out their case. Meanwhile, the philanthropic foundation that is the German company's biggest shareholder with a 21% stake, has indicated through its chairwoman, Ursula Gather, that it wants to "preserve the unity of the company as far as possible." However, Thyssenkrupp's elevator unit could be merged with Finnish specialist Kone, and German press reports indicate that Gather met with Kone's key shareholder two years ago. The company's former management team opposed the deal, but now that they are gone, a merger could be possible, and the company's shares rose 9% on the morning of July 17 following the announcement of the chairman's resignation on July 16. Observers note that Thyssenkrupp could post substantial gains if it can bring its margins in line with peers, and more radical options may be on the table with the help of the company's investors.
The Scourge of Japan's Boardrooms Turns Peacemaker With Big Win
" Bloomberg (07/16/18) Redmond, Tom; Sano, Nao"
After years of waging activist campaigns in Japan’s boardrooms, Yoshiaki Murakami is being hailed by executives as a peacemaker. Murakami—a champion of shareholder rights before his conviction for insider trading—played a key role in the merger of refiners Idemitsu Kosan Co. and Showa Shell Sekiyu K.K. He served as a consultant to Idemitsu's founding family, whose spat with executives obstructed the deal’s progress, and convinced them to accept the integration with concessions for shareholders. So important was his intervention that Idemitsu Chairman Takashi Tsukioka publicly praised Murakami at a press conference in Tokyo last week. “I think it’s a good thing, I really do,” Murakami said of the resolution, speaking in a rare interview after years of avoiding the media. “This merger contributes to Japan’s energy security.” Idemitsu and Showa Shell shares have jumped since reports last month that the merger, first terminated nearly four years ago, was back in play. The two companies will now combine in 2019. Murakami is also likely to see a solid return on his investment in Idemitsu, though he says he only purchased stock so he could enter the talks as a fellow shareholder. Idemitsu's founding family was always looking out for the company's interests, according to Murakami, and its position was never that far from the oil refiner's. He says the firm's executives should have explained the situation better. “There was a slight misunderstanding between the company and the founding family,” he said. “I realized there was no big gap after I talked to management.”
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