Nihon Global Growth Partners Submits Shareholder Proposals for Consideration at Toyo Suisan’s 2024 General Shareholders’ Meeting
April 24 2024 - 6:00PM
Business Wire
Proposals Include an Increased Dividend, Share
Repurchase of JPY20 Billion, Implementation of Directors’ Stock
Compensation Program, and Disclosure of Company’s Cost of
Capital
Issues Investor Presentation Outlining How Toyo
Suisan Can Maximize the Value of its Crown Jewel Assets and
Enviable Market Position to Help Narrow the Persistent Gap Between
its Share Price and Long-term Valuation
Believes Proposals Are Aligned with Current
Recommendations of Japanese Financial and Regulatory
Authorities
Today, an investor group (“the Investor Group,” the “Group” or
“we”) led by Nihon Global Growth Partners Management Inc. (“NHGGP”)
announced it has submitted four shareholder proposals (the
“Shareholder Proposals”) for consideration at Toyo Suisan Kaisha
Ltd.’s (2875.T) (“Toyo Suisan” or the “Company”) upcoming 2024
General Shareholders’ Meeting. NHGGP and the Investor Group
collectively own approximately 3.8% of Toyo Suisan’s common
shares.
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NHGGP also released an investor presentation outlining how their
proposals can help Toyo Suisan – known under the Maruchan brand in
Mexico and the United States – narrow the gap between its trading
price and the Company’s substantial long-term corporate value. The
presentation can be viewed here.
In the presentation, NHGGP and the Investor Group explain that
Toyo Suisan has a collection of exceptional assets and an enviable
market position for its instant noodle business – but that the
Company must modernize its capital allocation and corporate
governance policies in order to achieve an improved valuation in
line with its potential. The presentation also highlights that the
Company can unlock significant value by focusing on its core
instant noodle business, selling or spinning off its refrigerated
warehouse business, and exiting its legacy processed food and
seafood trading businesses – which would position it to become a
global instant noodle consolidator, as opposed to a target for
consolidation.
NHGGP and the Investor Group believe that with the appropriate
steps – which include the passage of the Shareholder Proposals –
Toyo Suisan’s market value would approach its intrinsic value of at
least JPY17,300 per share, as opposed to its current trading price
of JPY9,281 per share as of April 24, 2024.
The Shareholder Proposals include:
- Increase dividend payout ratio to 40% – this would make
the Company’s dividend payout more in line with peers, and the
proposed incremental increase represents only 1.9% of the Company’s
cash as of December 2023.
- Repurchase JPY20 billion of the Company’s shares – the
Company has not engaged in any meaningful share buybacks in the
past 17 years, and the proposed share repurchase represents only
4.6% of shareholders’ equity as of December 2023 – meaning it will
not negatively impact the capitalization of the Company in any
way.
- Implement a management stock compensation program –
currently, 85% of director compensation is fixed without any link
to performance, whereas the proposal would make 40% of total
compensation performance-linked and half share-based – equal to
market standards.
- Disclose its cost of capital – this proposal is
consistent with the recommendations of the Tokyo Stock Exchange
regarding disclosure of a Company’s cost of capital and would
provide the basis for a discussion between management and
shareholders regarding the rationale for continued investment in
the legacy businesses.
Brian Doyle, Managing Director of NHGGP, stated: “Toyo Suisan
excels in its core operating businesses and possesses crown jewel
assets, most notably its North American instant noodle and Japanese
refrigerated warehouse segments. As long-term investors with
decades of experience in the Japanese market, we believe in the
Company’s significant potential. However, in our view, it must
catch up to its peers in terms of capital allocation, shareholder
returns and strategic focus in order to ensure it takes its place
as a true global leader and does not get left behind. We believe
our proposals will help achieve this goal, and in the process
benefit all of Toyo Suisan’s stakeholders, including shareholders,
employees and consumers. We look forward to engaging with the
Company and our fellow shareholders in advance of the General
Shareholders’ Meeting.”
About NHGGP
Nihon Global Growth Partners Management Inc. (“NHGGP”) is a
long-term investor in Japanese listed companies that are growing
rapidly in markets outside of Japan. Prior to founding NHGGP in
2018, its principals were involved in managing several private
equity funds in Japan beginning in 2004. All of the principals’
prior private equity investments involved Japanese companies where
a substantial portion of the growth was in markets outside of
Japan. NHGGP manages private investment vehicles including the
NHGGP Japan Opportunities Fund L.P., which was launched in
2021.
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