Who's next? Asia investor activism set to grow after BlackRock public campaign (updated)

G-Resources

08/03/2016 09:29

* Asia public shareholder activism doubles from 2013 to 2015 
    * Investors seek better returns amid slow growth 
    * Companies prime defences against potential hostile attacks 
    * BlackRock campaign fails, but overall success rates rising 
 
 (Adds result of vote paragraph 3) 
    By Michelle Price and Elzio Barreto 
    HONG KONG, March 8 (Reuters) - Following a rare public 
campaign, BlackRock Inc  BLK.N  voted against a deal planned by 
a Hong Kong firm that the world's biggest asset manager partly 
owns, revving up investor activism in Asia after it roared ahead 
in 2015.  
    In a ballot on Tuesday, BlackRock rejected G-Resources Group 
Ltd's  1051.HK  plan to sell its main asset, an Indonesian gold 
mine, saying it didn't have confidence G-Resources would use the 
proceeds in investors' best interests. Owning 8 percent of 
G-Resources, BlackRock urged other shareholders to follow suit.  
    G-Resources, which has said it would use the proceeds to 
shift its focus to financial services, reported after market 
hours that the sale was approved by a 59 percent majority. 
    BlackRock's campaign, albeit unsuccessful, highlights how 
investors are becoming more active in seeking out better returns 
in Asia amid ultra-low interest rates and sluggish global 
growth. The trend has been given added weight by reforms in 
places like Hong Kong and Japan designed to enhance corporate 
governance and promote minority shareholder rights, giving 
investors ammunition to push back against company management. 
    "You have seen the success of activist funds in the United 
States improving businesses and increasing shareholder returns," 
said Seth Fischer, chief investment officer at Hong Kong-based 
activist hedge fund Oasis Management. "They are looking for 
further opportunities, bringing their critical know-how to Asia 
and saying, 'Let's produce the same things out here'." 
    According to data from research firm Activist Insight, the 
number of companies in Asia subject to one or more public 
shareholder demands more than doubled over the past two years to 
reach 31 in 2015, with nearly half successful, up from 30 
percent a year earlier.  
    More than 65 percent of cases were instigated by overseas 
investors, according to Activist Insight, with U.S. fund Elliot 
Associates' ultimately unsuccessful move to challenge 
restructuring at South Korea's Samsung Group and Oasis 
Management's action tackling Japanese technology firm Kyocera 
Corp  6971.T  and videogame maker Nintendo Co Ltd  7974.T  among 
recent high-profile campaigns.  urn:newsml:reuters.com:*:nL3N0ZJ1TX 
     
    BEHIND CLOSED DOORS 
    Typically, much investor activism takes place behind closed 
doors, especially in Asia where there is a cultural aversion to 
public confrontation. As Asian companies are often closely held, 
it is much tougher to successfully push for change in some 
markets in the region.  
    But investors said making grievances known publicly can 
sometimes accelerate changes - especially when faced with 
management intransigence. 
    Pru Bennett, head of BlackRock's investment stewardship team 
for the Asia-Pacific region, said the firm typically raises any 
concerns with firms in private. In the case of G-Resources, 
however, she said BlackRock felt airing its view in public was 
necessary to rally support from other minority investors. 
    "Engagement by companies with their key stakeholders is at 
an early stage in Hong Kong, but increasingly we think companies 
are seeing the value," she added. 
    Public campaigns are likely to become more prevalent in the 
region once success rates grow, with more and more companies 
preparing for greater investor scrutiny, according to Angela 
Campbell-Noe, senior partner at Tulchan Communications, an 
investor relations and communications firm which advises 
companies on how best to handle public investor attacks. 
    "We're increasingly doing crisis training and 
scenario-planning with companies, as speed and preparation are 
hugely important if a shareholder turns hostile," said 
Campbell-Noe. 
    "Companies are starting to look at their share registers and 
asking, 'Could this happen to me?'" 
 
 (Editing by Kenneth Maxwell and Miral Fahmy) 
 ((michelle.price@thomsonreuters.com; +85228472095; Twitter: 
@michelleprice36;)) 
 
Keywords: ASIA INVESTMENT/ACTIVISM