Activist Fund Considers Proxy Fights With Six Japanese Firms Next Year

(Bloomberg) -- An activist investor is considering making shareholder proposals at as many as six Japanese companies’ annual general meetings next year, in another sign that money managers are more willing than ever to press the nation’s listed firms to improve performance.

Asset Value Investors Ltd. will put items to the vote at the AGMs of companies including Tokyo Broadcasting System Holdings Inc. and Teikoku Sen-I Co. if they don’t boost shareholder returns, according to Joe Bauernfreund, chief executive officer of the British investor. He said he’s dissatisfied with both firms’ cross-shareholdings, stock held in other companies for the purpose of maintaining good relationships.

Shareholder activism has been increasing in Japan since Prime Minister Shinzo Abe sought to improve how companies are run by instituting a stewardship code for investors in 2014 and a corporate governance code the following year. Stock owners made proposals at the AGMs of 54 firms in June, the most on record and 14 more than in the previous year, according to data from IR Japan Holdings Ltd.

“We’re not happy with the management of the balance sheet” or the current share price at TBS and Teikoku Sen-I, Bauernfreund said in an interview in Tokyo. “In both cases, we don’t see the need for them to continue to hold strategic shareholdings.”

TBS said it holds constructive discussions with shareholders and has received various opinions about its management from Asset Value. On shareholdings in other companies, it said in its corporate governance report that it holds shares in business partners, customers and others from perspectives including improving corporate value and maximizing profits for shareholders of the TBS group. It said it doesn’t disclose its policy for selling individual stocks.

As a company doing disaster prevention business, Teikoku Sen-I holds shares of Hulic Co. in order to increase corporate value from a long-term perspective, a spokesman for Teikoku Sen-I said. Teikoku Sen-I has a stake worth about $191 million in Hulic, according to data compiled by Bloomberg.

Strong Potential

Bauernfreund said shares of both TBS and Teikoku Sen-I could double if management took steps to reduce their shareholdings in other Japanese companies and bought back stock at low prices.

The activist investor has long campaigned for TBS, a media company with shareholdings worth billions of dollars in other firms, to sell some of the shares and return cash to stock owners.

TBS has reported 37 shareholdings valued at $4.2 billion, which is more than its own market cap of about $2.9 billion, according to data compiled by Bloomberg. It holds a stake worth about $1.5 billion in Tokyo Electron Ltd., the data show.

Asset Value set up a 100 million-pound ($129 million) fund last year targeting companies with “inefficient capital structure” but with attractive operating performance.

Bauernfreund declined to identify the remaining four companies where Asset Value might make shareholder proposals.

To contact the reporters on this story: Min Jeong Lee in Tokyo at mlee754@bloomberg.net;Takako Taniguchi in Tokyo at ttaniguchi4@bloomberg.net

To contact the editors responsible for this story: Lianting Tu at ltu4@bloomberg.net, Tom Redmond, Dave McCombs

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