Activist Campaign

An independent Tokyo Radiator

Dear fellow shareholders, investors and other market participants,

Asset Value Investors (“AVI”) today announced that it has submitted shareholder proposals to Tokyo Radiator Mfg. Co. Ltd. (TYO 7235, “Tokyo Radiator”), a subsidiary of Marelli Corporation (“Marelli”), to address conflicts of interest between the parent company and minority shareholders arising from Tokyo Radiator’s listed subsidiary structure.

For almost five years, AVI has been in communication with Tokyo Radiator; Marelli, which holds approximately 40.1% of Tokyo Radiator’s shares; and Marelli’s parent company KKR, to resolve governance issues caused by Tokyo Radiator’s listed subsidiary structure and enhance Tokyo Radiator’s corporate value. AVI submitted shareholder proposals in June 2021 as part of its engagement activities, but, since then, Tokyo Radiator has continued to ignore AVI’s proposals and has made little effort to improve its weak governance.

In particular, AVI called on Tokyo Radiator to abolish the cash deposit system with Marelli, where approximately JPY 4.1 billion of cash, equivalent to 47% of Tokyo Radiator’s market capitalisation of JPY 8.8 billion, was lent to Marelli. As pointed out in ‘Practical Guidelines for Group Governance Systems’ by the Ministry of Economy, Trade and Industry, the deposit system is a cheap source of funds for Marelli. The system benefits only Marelli at the expense of minority shareholders who suffer from a return on the cash investment far below Tokyo Radiator’s cost of capital. Such conflict, in turn, leads to a low valuation (price-to-book ratio of 0.4x).

While Marelli recorded losses for the past four fiscal years, Tokyo Radiator continued to deposit cash to Marelli until shortly before Marelli entered into a debt restructuring on 1 March 2022, despite the risk that the deposits would not be returned in the event of Marelli’s bankruptcy. The continued depositing of cash with such a poor-quality counterparty was a potential breach of Tokyo Radiator’s Board’s duty of care. AVI supports the return of the deposits to Tokyo Radiator, but has nonetheless submitted shareholder proposals to ensure that such a practice is not reinstated again and that the deposits are returned to shareholders on an equal basis.

Other shareholder proposals call for the transition to a company with an audit and supervisory committee; the establishment of a nomination committee and a compensation committee chaired by independent outside directors; and the abolishment of senior advisory positions (Komon and Soudanyaku) to enhance the governance. In addition, AVI proposes introducing a stock-based compensation scheme for directors, which would provide greater incentives to increase corporate value and align interests with shareholders.

AVI asks its fellow minority shareholders to express their disapproval of the board of directors’ disregard for minority interests, by voting in favour of the shareholder proposals.

23rd May 2022

Joe Bauernfreund
CEO & CIO, Asset Value Investors

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This website, and the information contained herein, (collectively referred to as “the Website”) is being provided for the shareholders of Tokyo Radiator Mfg. Co., Ltd. (TSE 7235)(TRS) for information purposes only.  Asset Value Investors Limited (“AVI”) is the investment manager of one of the shareholders of TRS, namely AVI Japan Opportunity Trust (“AJOT”).

AVI is authorised and regulated by the UK Financial Conduct Authority (“FCA”) and is also registered as an Investment Advisor with the United States Securities and Exchange Commission (the “SEC”) under the United States Investment Advisors Act of 1940.

The Website is directed only at Professional Clients or Eligible Counterparties as defined by the UK FCA.

The Website was created solely for the purpose mentioned above and is provided for information purposes only.  AVI is by no means soliciting or requesting other shareholders of Tokyo Radiator to jointly exercise their shareholders’ rights with AVI (including, but not limited to, voting rights).

The Website exclusively represents the opinions, interpretations and estimates of AVI in relation to TRS’ business and governance structure.  AVI is expressing such opinions, interpretations and estimates solely in its capacity as an investment manager of AJOT.

The information contained herein is derived from proprietary and non-proprietary sources deemed by AVI to be reliable.  While AVI believes that reasonable efforts have been made to ensure the accuracy of the information contained in the Website, AVI makes no representation or warranty, expressed or implied, as to the accuracy, completeness or reliability of such information.







本ウェブサイトに掲載される情報は、AVIが信頼できると判断した専有又は非専有の情報源から得たものです。AVIは本ウェブサイトに掲載する情報の正確性を確保するために合理的な注意を払っておりますが、その正確性、完全性および 信頼性について明示・黙示にかかわらず一切の表明・保証をするものではありません。