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AVI Global TrustAnnouncement

16/05/2025 14:45

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RNS Number : 0713J  AVI Global Trust PLC  16 May 2025

 

AVI GLOBAL TRUST PLC

 

Monthly Update

 

AVI Global Trust plc (the "Company") presents its Update, reporting
performance figures for the month ended 30 April 2025.

 

This Monthly Newsletter is available on the Company's website at:
AGT-APR-2025.pdf
(https://www.assetvalueinvestors.com/content/uploads/2025/05/AGT-APR-2025.pdf?mc_cid=e60a4ba982&mc_eid=de375d3133)

 

This investment management report relates to performance figures to 30 April
2025.

 

 Total Return (£)   Month  Calendar Yr  1Y     3Y     5Y      10Y

                           to date
 AGT NAV            -0.9%  -4.8%        -0.8%  23.6%  100.2%  149.8%
 MSCI ACWI          -2.5%  -6.6%        4.8%   26.0%  74.5%   163.2%
 MSCI ACWI ex US    0.1%   2.2%         4.9%   18.5%  52.7%   84.4%

 

Manager's Comment

 

AVI Global Trust's (AGT) NAV declined -0.9% in April. In many ways, the modest
absolute change between the start and end of the month masks significant
underlying volatility, as investors have grappled with an erratic, uncertain
and quickly changing global trade environment as instigated by President
Trump. Markets have subsequently rallied hard; whether this sustains or
whether it evaporates into nothing more than a bear market rally remains to be
seen but there are clear risks to the latter. In a macro driven world we
remain focused on the bottom-up fundamentals, and have embraced the volatility
to add to new and existing names.

 

Toyota Industries was the most significant contributor (+105bps) as it was
announced that Akio Toyoda, grandson of Toyota's founder, is looking to take
the business private in a $42bn deal. We believe this to be of seismic
importance and write about it below.

 

Elsewhere, D'Ieteren added +84bps as the discount started to narrow, and Rohto
Pharmaceutical +40bps during a month in which we launched a public campaign
against the company (details of which can be found here
(https://www.assetvalueinvestors.com/campaign/awakening-rohto/) ).

 

The most significant detractor was Gerresheimer (-88bps) - which we expand
upon below. Partners Group and HarbourVest, detracted 32bps and -31bps,
respectively.

 

Toyota Industries

 

In the December 2023 newsletter
(https://www.assetvalueinvestors.com/content/uploads/2024/01/AGT-DECEMBER-2023.pdf)
we argued that 2023 was "a seminal moment in the long and winding road to
unlocking the enormous value trapped in Japanese companies" and explained how
we had (re) introduced Toyota Industries into the portfolio, with signs that
the winds of change were even blowing at the gates of one of Japan's last
holdouts of governance reform.

 

Fast forward to April 2025, and it has been announced that Akio Toyoda,
Chairman of Toyota Motor, is attempting to take Toyota Industries private, at
an 40% reported premium to the undisturbed share price.

 

For decades, "Japaneseness"; Toyota has epitomised group companies,
crossshareholdings, lifetime employment, consensus decision-making and keeping
closed ranks. Corporate governance naysayers have argued that it's been these
very qualities that have kept companies like Toyota strong, leading the
company to be seen by some as an "emblem of resistance to corporate governance
reform".

 

Just as Ernest Hemingway described the process of how one goes bankrupt -
"gradually, then suddenly" - so too is change in Japan, and the take-private
offer should be seen as a culmination of many multi-year forces coming
together.

 

Foreign shareholders have been an increasing presence on their register, a
fact not lost on Akio Toyoda himself. As Chairman of Toyota Motor, he has felt
the increasing heat from corporate governance reform, with his approval rating
at Toyota's last AGM in 2024 falling to 72% from 96% in 2022.

 

External forces have also played a role, as even Toyota has not escaped the
eye of the Tokyo Stock Exchange and METI. Cross-shareholdings have been a
point of contention for group parent companies like Toyota, as have
parent-child listed subsidiaries and persistently low valuations. METI's
ongoing efforts to promote greater transparency and sophistication in takeover
proposals also deserve commendation.

 

Then, of course, there are the activists. Since 2015, we at AVI have been
encouraging management to unwind their crossshareholdings and investment
securities, which made up almost half of Toyota Industries' balance sheet
assets. At the same time, AVI (across our Japan dedicated mandates) was also
invested in Aichi Corp (since 2019), which was majority owned by Toyota
Industries. Working with both companies, we sought to catalyse change in their
ownership structures as part of a broader set of recommendations. Our efforts
with Aichi moved into the public sphere last year, when we launched a campaign
entitled Taking Aichi Higher
(https://www.assetvalueinvestors.com/campaign/taking-aichi-higher/) . In March
of this year, Toyota Industries and Aichi announced a sale and buyback that
would bring Toyota Industries' controlling stake of 52% in Aichi down to 20%.

 

As we see it, the potential take-private transaction implicitly acknowledges,
ratifies, and supports the mantra of both activists and Abenomics advocates.
At the same time, the actions of Toyoda dissolve a symbolic bastion of
resistance to the wave of corporate governance reform, opening the floodgates
for that wave to spread its influence throughout the market. As such, we
remain highly excited about the opportunity in Japan, with 24% of the
portfolio invested there.

 

Gerresheimer

 

Gerresheimer
(https://www.assetvalueinvestors.com/content/uploads/2025/03/AGT-FEBRUARY-2025.pdf)
detracted heavily over the month, as it was reported that KKR withdrew from
the consortium assessing whether to take the business private. This led to a
-15% one-day decline in the shares.

 

The past month has been a painful one for the stock and for us as
shareholders. Despite that, we remain relatively sanguine. Q1 results
(November year-end) were published during the month, and management reiterated
guidance for the full year. The acquisition of Bormiloli is continuing to be
integrated and steps are being taken to get the right legal structures in
place for the separation of the Moulded Glass unit. We believe this is key to
unlocking value, even if we understand the market's scepticism and frustration
at management's execution and communication. The business will produce north
of €5 per share of EPS in 2025 and we believe there are multiple steps that
can be taken to help the market capitalise this at a much fairer multiple. We
bought more shares over the month and own a little over 3.5% of the company
(across our funds) and continue to engage with management.

 

Contributors / Detractors (in GBP)

 

 Largest Contributors  1- month contribution  % Weight

                       bps
 Toyota Industries     105                    4.0
 Dieteren              84                     7.1
 Rohto Pharmaceutical  40                     4.5
 Entain                33                     3.6
 Irish Residential     29                     2.7

 

 Largest Detractors     1- month contribution  % Weight

                        bps
 Gerresheimer AG        -88                    5.7
 Partners Group PE      -32                    4.9
 Harbourvest Global PE  -31                    5.1
 IAC                    -30                    0.0
 Symphony               -26                    1.9

 

 

MUFG Corporate Governance Limited

Corporate Secretary

 

16 May 2025

 

LEI: 213800QUODCLWWRVI968

 

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