An activist fund with a history of pressuring Japanese management has emerged as the largest minority shareholder of PanaHome — the housebuilder at the heart of a spiralling proxy battle and pivotal test of Japan’s corporate governance code.
As of Friday, Oasis Capital, which is led by Seth Fischer, held some 4.83 per cent of PanaHome, putting the fund ahead of Japan’s Government Pension Investment Fund (which holds 3.5 per cent via multiple fund managers) on the shareholder register and creating what other minority investors have called a “focal point” for applying pressure to management.
Investors now plan to lobby the proxy advisory group Institutional Shareholder Services.
The imbroglio centres on a row over what one investor called a “fantasy” low valuation by PanaHome’s majority shareholder, Panasonic. It has revived fears among both foreign and domestic investors that Japanese companies have made little more than cosmetic progress on corporate governance.
The establishment of Japan’s first corporate governance code in 2015 was hailed in many quarters as tangible success of the “Abenomics” programme of prime minister Shinzo Abe. Since then, however, even people involved in writing the code have admitted that corporate Japan has yet to make the cultural shift necessary for companies to genuinely cater to shareholder interests.
Mr Fischer’s engagement with Japanese management in recent years has included a three-year campaign to convince the Kyoto-based Nintendo to pursue growth beyond the traditional console business and release games on mobile phones — an effort that bore fruit in December 2016 with the launch of Super Mario Run.
Mr Fisher said: “It is important that prominent companies such as Panasonic take a lead role in applying good corporate governance, rather than undermining it and with it the confidence of all shareholders.”
The PanaHome row centres on an attempt by Panasonic to buy in the 46 per cent of PanaHome it does not already own. Although the move itself — buying-in a listed subsidiary — is seen by corporate governance proponents as positive, the complaints focus on the proposed price.
One investor’s letter to PanaHome management described the proposed transaction as “an affront to the principles of transparency and corporate governance that form the bedrock of Abenomics”.
Under the acquisition agreement announced in late-December, 0.8 shares of Panasonic will be swapped for each share of PanaHome based on an independent calculation conducted by SMBC Nikko Securities, commissioned by PanaHome. Although that implies a value of ¥1,009 per PanaHome share — above last Friday’s close of ¥979 per share — when net cash is stripped out, the valuation amounts to ¥339 per share. Mr Fischer has argued that in a fair and competitive auction, the PanaHome shares could command a valuation of ¥1,500 per share.
That places PanaHome, which sits in the top 5th percentile of the market in terms of 10-year operating profit growth, in the bottom 5th percentile by valuation. One investor, who declined to be named, questioned the methodology of the report.
SMBC Nikko declined to comment, while Panasonic said that the valuation reflected the financial conditions, earnings trends and share price movements of the two companies.
Sample the FT’s top stories for a week
You select the topic, we deliver the news.
