Investor group urges Toyo Suisan to focus on instant noodles, exit legacy business
24/04/2024 22:00
By Svea Herbst-Bayliss
NEW YORK, April 24 (Reuters) - An investor group is
urging Toyo Suisan Kaisha 2875.T to consider exiting its
legacy business 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 Partners
Management, 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.
Nihon Global Partners, 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.
Nihon Global Partners 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.
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))