Confronted with takeover-defense measures adopted by Japanese companies, Warren Lichtenstein, the head of U.S. hedge fund Steel Partners, urged Japanese investors Tuesday to consider the downside of such “poison pill” tactics.
“We believe that poison pill is illegal and discriminates against shareholders,” Lichtenstein told a news conference in Tokyo. “It’s (still) new (in Japan) and so people don’t understand.”
With stakes in more than 30 Japanese companies, Steel Partners Japan is one of the most prominent U.S. activist hedge funds here. It is the biggest shareholder in such firms as Worcestershire sauce maker Bull-Dog Sauce Co., wig maker Aderans Co., brewer Sapporo Holdings Ltd. and Nissin Food Products Co.
Steel Partners has been pressing the firms to boost dividends while trying to take over some of them, but its buyout attempts have so far been unsuccessful.
Late last month, Aderans shareholders approved the antitakeover measure proposed by the wig maker, enabling the company to issue equity warrants to dilute Steel Partners’ stake. Sapporo shareholders also backed the brewer’s takeover-defense measure in March.
“No companies should strip their shareholders of their rights,” Lichtenstein said.
Many companies, including Bull-Dog, are scheduled to hold their annual shareholders’ meetings later this month. Bull-Dog’s antitakeover proposal will be put to shareholders June 24.
“We don’t believe the Japanese corporate law should allow poison pill,” Lichtenstein said, adding that the U.S. fund’s notions will prevail in Japan over time.
He described his first public appearance here as an opportunity for Japanese managers to learn about the fund. “We need to educate the management of the Japanese companies that we invest in, as well as our fellow shareholders.”
Investment funds like Steel Partners are often regarded here as merely trying to exploit companies to reap short-term gains.
In December, Steel Partners earned several billion yen when it sold its stake in instant-noodle maker Myojo Foods Co. to industry leader Nissin Food after Myojo pursued a capital alliance with Nissin to ward off a hostile takeover by the investment fund.
The move raised the question whether Steel Partners was waiting for the arrival of a white knight to push up share prices before selling.
But Lichtenstein reiterated that Steel Partners has been and will continue to be a “long-term” investor, holding shares in companies from three to five years.
He said that although “we’ve never taken and will never take greenmail,” the U.S. fund has been misunderstood in Japan.
The firms Steel Partners has stakes in oppose the fund’s buyout offers because top management of Japanese companies have not been held accountable for years, Lichtenstein said.
“It’s the initial reaction,” he said. “Once they get to know us, once we begin to work with them, they will understand.”
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