Asset Value Investors Limited (“AVI” or “we”) today announced that it has launched this website highlighting the exploitation of Daibiru Corporation (TYO 8806) (“Daibiru”) by its parent company Mitsui O.S.K. Lines, Ltd. (TYO 9104) (“MOL”), and requesting that Daibiru withdraws its support for MOL’s 2,200 yen tender offer and resume negotiations with MOL to seek a higher purchase price.
Since AVI became a shareholder of Daibiru in September 2020, we have put forward various proposals to sustainably enhance Daibiru’s corporate value while considering the interests of various stakeholders. We highlighted governance issues caused by the appointment of directors and auditors from the parent company (in Japanese so-called “Amakudari”), the deteriorating morale and motivation of employees, and the lack of trust in management. Three of Daibiru’s four inside directors, including Toshiyuki Sonobe President and Representative Director, have been appointed directly from MOL. Prior to joining Daibiru none of these inside directors had any experience in the real estate industry.
While we welcome the decision by Daibiru and MOL to abolish the parent-child listing structure in line with our proposals, the lowly Tender Offer Price highlights the failure to protect the interests of minority shareholders. Daibiru publicly discloses a 3,000 yen per share estimated market value of its real estate. Using the fair market value is a widely accepted methodology for valuing real estate companies and has frequently been used in Japan for other real estate tender offers. We question how the board of Daibiru could have reasonably accepted a 2,200 yen per share Tender Offer Price given this is a near 30% discount to Daibiru’s real estate value.
One of the main reasons put forward by MOL to proceed with the transaction is the creation of various synergies. To respect the interests of minority shareholders, Daibiru’s board should have insisted in negotiations that such synergies be reflected in the Tender Offer Price. That Daibiru’s board did not do so highlights their lack of commitment to protecting minority shareholders’ interests.
Daibiru made no effort to invite other interested parties to submit higher bids and agreed a price anchored to MOL’s low-ball initial offer of 2,000 yen. The absence of market checks only serves MOL’s interests in paying a discounted price and is not in minority shareholders’ best interests.
To protect the interests of minority shareholders, the tender offer process should have incorporated a majority of minority clause. Its absence shows MOL’s lack of confidence in the fairness of its price and procedure, and Daibiru’s board should have insisted on its inclusion.
The conflicts of interests, weak protections for minority shareholders and the discounted tender offer price are clearly not in the interests of minority shareholders. MOL’s tender offer process and price only serves to reinforce the poor reputation of Japan’s stock market. We call on the board of Daibiru to withdraw its support for MOL’s 2,200 yen tender offer, introduce a majority of minority condition and resume negotiations with MOL to seek a higher purchase price of at least 3,000 yen.
CEO & CIO Asset Value Investors
9th Dec 2021
Also available in: 日本語 (Japanese)
* As at 28 January 2022
** Source: Morningstar, performance period 23 October 2018 to 28 January 2022, TR net of fees, GBP
*** As at 30 September 2020, includes: management fee 1.0%, marketing and administration costs.
AVI Japan Opportunity Trust p.l.c is referred to as ‘AJOT’ throughout the website. AJOT’s investment managers, Asset Value Investors are referred to as ‘AVI’