Business

Infamous shareholder activist Murakami returns to fray in league with daughter

by Tom Redmond

Bloomberg

Yoshiaki Murakami, Japan’s most famous activist shareholder before he was convicted of insider trading in 2007, is once again pressing the nation’s companies and this time it’s a family act.

Murakami and C&I Holdings Co., an investment firm headed by his 27-year-old daughter, have built a stake in Kuroda Electric Co. and say the maker of electronic parts should return more to shareholders. They want to put four outside directors, including Murakami, on the board. As shareholders prepare to vote on the proposals at an Aug. 28 extraordinary meeting, one former president of Kuroda Electric has already expressed support.

Murakami, an outspoken early champion of shareholder rights in Japan, is re-entering the fray almost a decade after the scandal that forced him to close his multibillion-dollar fund. He now lives in Singapore. As government reforms spur a revival of activism in Japan, his daughter, Aya, says the nation’s now ready for her father’s ideas.

“Initially it was too early for his thinking to be accepted in Japan. Now the times are catching up,” Aya Murakami said in an interview in Tokyo on July 10.

“Japan is still a developing country compared with overseas when it comes to its listed companies.”

Murakami, a former bureaucrat who quit the trade ministry in 1999 to start his eponymous fund, made headlines the next year when he attempted to buy electronic-parts maker Shoei Co. in the first hostile takeover bid by a Japanese investor. He then demanded companies including Tokyo Style Co. and the operator of the Osaka bourse increase shareholder returns.

In 2007, Murakami was convicted on charges that he bought shares in a broadcaster after learning that Internet entrepreneur Takafumi Horie’s Livedoor Co. planned to make a hostile bid for its control. Murakami was sentenced to two years in prison, which was suspended on appeal.

The Murakami family and associates own about 16 percent to 17 percent of Osaka-based Kuroda Electric, Aya Murakami said. While the manufacturer runs its business well, it doesn’t understand capital policy, says the former Morgan Stanley banker, who cited convertible debt the company issued in 2012 that she says damaged shareholder value.

“When Kuroda’s management talk about this, they say the company has tended not to borrow money as it wanted to avoid taking on debt,” she said. “With a convertible bond, you don’t have to pay as much interest, they say. But the interest is ultimately being paid by shareholders.”

Kuroda Electric considered what was best for the company and decided issuing convertible bonds was the most appropriate approach at the time, spokesman Mamoru Mochimaru said by phone on Monday.

Murakami and C&I say Kuroda Electric should pay out all profits to shareholders for the next three years. Yoshitaka Kuroda, former president and member of the founding family, said he will support their outside director nominations at the extraordinary meeting.

The company’s management opposed the proposals and pledged to boost its dividend payout ratio to as much as 65 percent, it said July 10. Kuroda Electric’s shares soared 9.1 percent in Tokyo on Monday to the highest close since 2005.

Activists are returning to Japan as the country overhauls how its companies are run through steps including starting a corporate governance code. Daniel Loeb of Third Point took on the secretive robot-maker Fanuc Corp., which later said it would pay more to shareholders. Seth Fischer of Oasis Management had success with Nintendo Co. Homegrown investors, some of them with ties to the Murakami Fund, are also pressing for change.

Aya Murakami, a graduate of Tokyo’s prestigious Keio University, became president of C&I at the end of June. She’s part of a group of five, including her father, who handle the family’s investments. Those include stakes in Accordia Golf Co., Sanshin Electronics Co. and Excel Co., according to data compiled by Bloomberg.

C&I and Murakami don’t manage money for others and have no plans to do so, which means they can worry less about returns and focus more on their investment philosophy, Aya Murakami said.

“I feel a strong empathy with my dad’s thinking,” said Murakami, who spent time in Singapore learning about investing from her father. “I wanted to be involved in what he was doing.”

She’s optimistic that shareholders will back her group’s plans for Kuroda Electric. The proposals need support from a majority of the shareholders who vote, she said, while noting that foreign investors account for about half of the company’s register.

“I think there’s a very high chance we’ll win,” she said.