REG - AVI Global Trust PLC - Correction: shareholder proposals to NS Solutions

AVI Global TrustAnnouncement

18/05/2022 07:00

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RNS Number : 8473L  AVI Global Trust PLC  17 May 2022

May 17, 2022

 

CORRECTION TO ANNOUNCEMENT NUMBER 8188L, RELEASED AT 2.00 PM ON 17 MAY 2022

 

Correction to date on which AVI first invested in NSSOL

 

Asset Value Investors (AVI) submits shareholder proposals to NS Solutions, a
subsidiary of Nippon Steel

 

London, May 17, 2022 - Asset Value Investors ("AVI") today launches a public
campaign on the submission of its shareholder proposals to NS Solutions (TYO
2327, "NSSOL"), a subsidiary of Nippon Steel Corporation (TYO 5401, "Nippon
Steel").

 

AVI owns 1.2% of voting rights of NSSOL. Having first invested in March 2020,
the team has now concluded that a continued approach of constructive private
dialogue has no prospects of success.

 

A detailed presentation has been published on AVI's dedicated website -
www.takingNSSOLtothenextlevel.com (http://www.takingNSSOLtothenextlevel.com)

 

AVI identified the following issues:

-     Due to the parent-subsidiary listing relationship between NSSOL and
Nippon Steel, the standards of governance and treatment of minority
shareholders expected of a Prime Market listed company have not been achieved.

-     Two former Nippon Steel executives with no experience in the IT
services industry have been appointed as internal directors of NSSOL in the
last two years.

-     NSSOL has deposited 90.2 billion yen of cash with its parent company
Nippon Steel at an interest rate of about 0.2%.

-     NSSOL holds 67.8 billion yen in shares of its clients, mainly
Recruit HD.

-     There is potential disregard for employee welfare issues.

-     The parent company holds a prohibitively high 63.4% of the shares,
preventing NSSOL from conducting share buybacks from general shareholders as a
further reduction in the free float could violate the criteria for prime
listing.

 

Against this backdrop, NSSOL trades at a significant undervaluation to its
fair enterprise value. Specifically, the company's EV/LTM EBIT is 6.8x after
factoring in the after-tax value of investment securities, which is close to
half the average 13.3x for competitors in the industry. Despite the low
valuation and deteriorating capital efficiency, the current Board of Directors
have taken little action to address AVI's concerns, failing to maximise
corporate value for shareholders.

 

Joe Bauernfreund, CEO of AVI, comments: "NS Solutions must take steps to
achieve the highest standards of corporate governance and capital discipline
that a Prime Market publicly traded company should uphold, and to address its
undervaluation.

 

"As the controlling shareholder, Nippon Steel has an obligation to ensure that
NS Solutions is managed for the benefit of all stakeholders. Nippon Steel has
the power to hold NSSOL's board to account and call on NSSOL to address poor
employee welfare and its discounted valuation."

 

AVI, as a leading minority investor with a fiduciary duty to hold the
companies in which it invests to the highest standards, suggests the following
four urgent measures to the Board of Directors of NSSOL to improve employee
welfare, governance, and capital efficiency:

 

(1)  Promptly initiate discussions with the parent company to reduce its
percentage of voting rights to about 60% through a share buy-back of 7,834,000
shares from the parent company Nippon Steel via a discounted TOB or other
arrangements within one year from the conclusion of the 42(nd) Ordinary
General Meeting of Shareholders in June 2022.

 

(2)  Establish a policy to reduce strategic shareholdings, and unless due to
unavoidable circumstances, sell or dispose of all strategic shareholding at
fair value by 1(st) March 2023.

 

(3)  Establish a policy not to make deposits to the parent company, its
subsidiary, or affiliated companies, and to immediately recover the current
deposits.

 

(4)  Establish a special investigative committee ("Special Investigation
Committee") for the purpose of examining compliance-related matters such as
sexual harassment and power harassment at the Company. The Special
Investigation Committee shall be composed of members qualified as lawyers who
are independent from both the Company and the Directors of the Company. The
Special Investigation Committee must disclose the results of its investigation
by way of a report, including remedial measures by 1(st) September 2022.

 

Despite regular private dialogue, the Board of Directors of NSSOL have ignored
AVI's recommendations and failed to put forward remedial solutions.

 

 

-      ENDS -

 

Notes to editors

Full details can be found on AVI's dedicated website
www.takingNSSOLtothenextlevel.com (http://www.takingNSSOLtothenextlevel.com)

 

AVI is a London-based investment management company that has been investing in
Japanese equities for more than 20 years. AVI was established in 1985 and has
been investing in the equity markets for more than 35 years. AVI's investment
team is committed to contributing to sustainable improvements in corporate
value by engaging with the management teams of its portfolio companies, with
approximately ¥78bn invested in Japanese equities.

 

Contact:

Kaz Sakai

kaz.sakai@assetvalueinvestors.com (mailto:kaz.sakai@assetvalueinvestors.com)

 

Disclaimer:

In respect of content and information set out in the English language version
and the Japanese language version of this press release, in the event of any
inconsistency between them, the Japanese language version shall prevail unless
otherwise expressly indicated.

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