Orbis Investment Management Limited (“Orbis”) is a global investment firm founded in 1990 that is a significant investor in Japanese companies. As signatories of Japan’s Stewardship Code, we monitor and engage with our investee companies including Nippo Corporation (1881:JT). As a long-term investor, Orbis seeks to enter into constructive relationships with companies but has a duty to act in the best interests of its clients.
In September 2021, Nippo announced that it had entered into an agreement with Nippo’s parent, ENEOS Holdings Inc. (5020:JT) and Goldman Sachs whereby Nippo will be privatised for JPY4,000 per share. Orbis believes that the process followed by the Special Committee of the Board of Directors of Nippo formed to approve the transaction is deeply flawed and has resulted in a transaction that is abusive and unfair to minority shareholders who will be forced to accept an inadequate offer that meaningfully undervalues Nippo, given in particular its significant non-operating assets.
A number of institutional shareholders share our sentiment as evidenced by the press releases issued by Japan Catalyst on 24 September, Silchester International Investors on 27 September and Oasis on 4 October. We are broadly supportive of their observations, and we call upon the Special Committee to revoke their support for the transaction until such time as they have:
- Invited competing offers from both industry and financial acquirers for Nippo’s operating and non-operating assets
- Obtained an appropriate valuation of Nippo’s non-operating assets such as real estate, equity securities and other financial assets
- Disclosed the full details of all valuation reports and fairness opinions to allow minority shareholders to decide whether to tender their shares or exercise their right to have a court determine fair value
- Imposed a majority of minority approval condition on any transaction in accordance with the Ministry of Economy, Trade and Industry’s Fair M&A guidelines
We are hopeful that Nippo, ENEOS, Goldman Sachs and others who benefit from access to the capital markets share our view that they assume an obligation to treat security holders fairly, and that doing so is essential to protect the public interest in maintaining confidence that capital markets operate efficiently, fairly and with integrity.
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