Nomura Announces Buyback, Reduced Chairman Role Before Annual Meeting
Nomura Announces Buyback, Reduced Chairman Role Before Annual Meeting
(Bloomberg) -- Nomura Holdings Inc. is reducing its stake in an affiliate tied to an information leak and has withdrawn a proposal to nominate its chairman to key board roles in a bid to bolster governance ahead of its annual shareholder meeting.
Japan’s biggest brokerage will use proceeds from trimming its holding in Nomura Research Institute to buy back as much as 150 billion yen ($1.4 billion) of shares, it said in a statement Tuesday.
Nomura’s shareholders are scheduled to meet on Monday, with one influential proxy adviser calling for the ouster of Chief Executive Officer Koji Nagai after the firm was penalized for leaking sensitive stock-market information. Shares of the Tokyo-based company have tumbled 19% this year after it posted its first annual loss in a decade.
Nomura withdrew its proposal to re-elect Chairman Nobuyuki Koga as head of the compensation and nominating committees, it said in Tuesday’s statement. It is now asking shareholders to vote in favor of outside director Hiroshi Kimura for those positions, a move that it said “will help further enhance governance.”
What Bloomberg Intelligence Says
Nomura’s new share buyback plan could raise earnings per share by about 9%, based on our analysis, with return on equity edging up to 4.2% this fiscal year.
Francis Chan, banking analyst
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Proxy advisory firms Glass Lewis and Institutional Shareholder Services had urged shareholders to vote against Koga, 68, due to concerns over governance. Glass Lewis said having an inside director as chairman of the two committees made oversight of executive performance and pay “more complicated and less rigorous.”
ISS recommended that shareholders also vote against Nagai, 60, saying he should be held responsible for the information leak. The Financial Services Agency ordered Nomura to improve internal controls over the incident, and companies dropped the firm from managing fund-raising deals. Nagai took a 30% pay cut for three months, but vowed to stay on as CEO.
The leak began with a Nomura Research Institute employee, who was on a Tokyo Stock Exchange panel considering an overhaul of the bourse’s sections of listed stocks. The person gave information on the potential threshold for the changes to a strategist at Nomura’s main securities unit, and the brokerage’s employees then shared the information with institutional clients.
In the deal announced Tuesday, Nomura Research Institute agreed to buy back its shares from Nomura for 160 billion yen, pushing down the brokerage’s stake in NRI to 23.1% from 36.6%. Shares of Nomura closed down 2.1% in Tokyo before the statement was released.
After the announcement, S&P Global Ratings placed NRI on a negative credit watch, since the share repurchase will be mostly funded with debt.
To contact the reporter on this story: Takashi Nakamichi in Tokyo at tnakamichi1@bloomberg.net
To contact the editors responsible for this story: Marcus Wright at mwright115@bloomberg.net, Russell Ward
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