Investor group urges Toyo Suisan to focus on instant noodles, exit legacy businesses

Global Partners LP

24/04/2024 22:49

(Adds quote in paragraph 12)
    By Svea Herbst-Bayliss
       NEW YORK, April 24 (Reuters) - An investor group is
urging Toyo Suisan Kaisha  2875.T  to consider exiting its
legacy businesses plus raise its dividend and buy back shares,
arguing these steps could roughly double the Japanese ramen
noodle maker's share price, a report seen by Reuters says.
    The group, led by private equity firm Nihon Global Growth
Partners Management (NHGGP), owns a 3.8% stake in the company,
which owns Maruchan Inc, a hugely popular instant noodle maker.
Together the investors submitted four shareholder proposals
which, if passed at this year's annual meeting, may lift the
share price to roughly JPY 17,300, the report says. 
    NHGGP, which invests in Japanese listed companies that are
growing rapidly outside of Japan, said the company should exit
its refrigerated warehouse business and consider a sale to
strategic buyer or a public listing.
    It also proposed Toyo Suisan separate its processed foods
and seafood trading business, arguing the businesses are not
large or competitive enough to cover their cost of capital.
    "We see no strategic reasons to continue holding the legacy
businesses but many good strategic reasons for exiting them,"
the report said. Toyo Suisan's return for shareholders has
lagged rival Nissin  2897.T  by more than 20% from 2021 to 2023,
the report said, noting this gap can be closed.
    A representative for the company was not immediately
available for comment. 
    More immediately, the investor group wants the company to
increase its dividend payout ratio to 40% from its historical
levels of around 30%, arguing an increase would not hurt the
company's ability to invest in the future and would bring it
more in line with peers' payouts.
    It also wants the company to buy back JPY20 billion worth of
stock, or 2% of shares outstanding and revamp director and
management compensation to tie 40% of compensation to
performance.
    Finally the investor group wants a better explanation of how
management spends capital, including why billions are funneled
into the legacy business instead of the global noodle business,
for example.
    "We believe our proposals will help to narrow the gap
between the company's current share price and its long-term
corporate values," the report said.
    NHGGP and its allies have met with the Toyo Suisan's
investor relations staff over the past year. It also asked to
meet with senior management and board members before submitting
its shareholder proposals.
    Brian Doyle, NHGGP's managing director, said Toyo Suisan has
"significant potential" but noted the company "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."
    Shareholder proposals gained more traction in Japan last
year as a number of resolutions received greater support,
according to data from proxy solicitor Georgeson, at a time
momentum in shareholder activism is growing in the world's
third-largest economy.

 (Reporting by Svea Herbst-Bayliss
Editing by Alistair Bell)
 ((svea.herbst@thomsonreuters.com; +617 233 2138; Reuters
Messaging: svea.herbst.thomsonreuters.com@reuters.net))