An activist nudge is all it takes in Japan Inc

Mitsui Fudosan Co

15/04/2024 12:00

(The author is a Reuters Breakingviews columnist.  The opinions
expressed are his own.)
    By Anshuman Daga
       TOKYO, April 15 (Reuters Breakingviews) - It used to
require a shove from foreign activists to get Japanese companies
to think hard about shareholder value. Now a gentle prod appears
enough - and peer pressure is at work too. That means it is hard
to know who deserves credit for any turnaround in fortunes.
    The country's top property group, $31 billion Mitsui Fudosan
 8801.T , pledged last week, in its 2030 strategy outlined in a
55-page presentation, to lift returns and halve its strategic
shareholdings. The stock shot up 8% on Friday. The plan partly
answers demands from U.S. activist Elliott Management.
    CEO Takashi Ueda somewhat embraced shareholder religion when
he took charge in 2023, marking the company's first leadership
change in over a decade. He's pushing further now, aiming for a
10% return on equity or higher by 2030, up from its latest 6.9%
performance. That would take it above peers. 
    Elliott says the plan reflects "constructive dialogue" it
had with Mitsui in recent months. But it's only a partial win.
The strategic shareholdings are worth about $1.2 billion,
according to Morgan Stanley MUFG Securities. The company stopped
short of committing to a timeline to dispose of its 5.9% stake
worth $3.3 billion in Oriental Land  4661.T , which operates
Tokyo Disneyland. Mitsui reclassified that as a pure investment
as of March last year. Its $260 million planned share buyback
over one year, meanwhile, is a far cry from the 1 trillion yen -
more than $6.5 billion - share repurchase the U.S. investor is
seeking.
   Including the gains on Friday, Mitsui shares have risen about
one third since news emerged in February of Elliott's roughly
2.5% shareholding. Though this underperforms a 50% rise in peer
Mitsubishi Estate's  8802.T  stock, shareholders appear willing
to take management assurances about improving performance
seriously.
    For their part, company bosses are more readily making the
right noises on the back of a campaign by the Tokyo Stock
Exchange and also fearing a backlash from their increasingly
demanding domestic shareholders. With pressure piling up from
all sides, applause ought to be shared, too. 
    
    CONTEXT NEWS
    Mitsui Fudosan, the top property group in Japan by market
value, said on April 11 that it would target a total payout
return ratio of 50% or higher up to its fiscal year for 2026, up
from 45%. It also proposes to sell 50% of its strategic
shareholdings within three years.
    Elliott said it was "encouraged by the company's decision to
meaningfully raise return on equity, asset turnover, and capital
return targets; significantly reduce cross shareholdings; and
enhance its corporate governance." It said the targets reflect
"constructive dialogue" it has had with Mitsui in recent months.

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Reuters: Mitsui Fudosan's return on equity is lacklustre    https://reut.rs/4ayQeNv
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 (Editing by Una Galani and Katrina Hamlin)
 ((For previous columns by the author, Reuters customers can
click on  DAGA/ 
anshuman.daga@thomsonreuters.com; Reuters Messaging:
anshuman.daga.thomsonreuters.com@reuters.net))