Tokyo Broadcasting investor launches activist campaign (updated)

TBS Holdings

25/10/2017 12:40

* Asset Value Investors calls for sale of cross-holdings 
    * Wants stake in Tokyo Electron sold down 
    * Latest move by investors to shake up corporate governance 
 
 (Adds TBS comment) 
    By Simon Jessop and Sam Nussey 
    LONDON/TOKYO, Oct 25 (Reuters) - A London-based investor in 
Japan's Tokyo Broadcasting System Holdings (TBS)  9401.T  said 
it was pressing the company's board to sell stakes in other 
companies and return the resulting windfall to shareholders. 
    The activist campaign is the latest attempt by a Western 
investor to overhaul corporate governance in a Japanese company, 
a mission shared by the government of Shinzo Abe which sees such 
moves as a valuable spur to economic growth.  urn:newsml:reuters.com:*:nL2N1M10R6 
    Asset Value Investors (AVI), whose 1.5 percent stake in TBS 
is worth around $57 million, said on Tuesday if the company 
fails to act, AVI was prepared to put a formal resolution to a 
vote at the next annual shareholders' meeting.  
    TBS's biggest cross-holding is in Tokyo Electron  8035.T , 
where it is the fourth-biggest shareholder with a 4.7 percent 
stake worth $843 million, Thomson Reuters data showed. 
    "As an investor in TBS today, you're effectively buying 
Tokyo Electron, and that's not right," said Joe Bauernfreund, 
chief executive of AVI, confirming what the Wall Street Journal 
reported on Tuesday.  urn:newsml:reuters.com:*:nL4N1MZ4H6 
    Bauernfreund said AVI, which manages around $1 billion, met 
the company in March and first wrote to it in April outlining 
its thoughts, but the request was ignored. 
    It then met TBS again in July, when the company acknowledged 
it had received the letter, before writing a second time in 
September. A response to that letter came last week, in which 
TBS said it was giving due consideration to its holdings, 
according to Bauernfreund. 
    TBS confirmed it had received AVI's proposal and said that 
it was being considered by senior management in line with 
company practice.  
    Cross-shareholdings are held to "maintain a proper business 
partnership and mutual faith," the company said in a statement, 
adding that shareholdings are regularly reviewed.  
    TBS's cross-shareholdings portfolio accounts for almost the 
total market value of the company, of which between 35 and 40 
percent was in Tokyo Electron, making it "the obvious one" to 
deal with, Bauernfreund said. 
    "It means the value of the stake in Tokyo Electron is about 
a third of the market cap of Tokyo Broadcasting; it's far more 
important than the television production business they engage 
in." 
    While there was a historical commercial relationship between 
the two companies, there was now no explicit, significant 
relationship between them, Bauernfreund said, referring to 
disclosures in the company's annual report. 
    Bauernfreund said he was mindful that corporate 
cross-holdings were an important part of Japanese corporate 
culture, so he would be happy to see TBS sell a quarter or a 
half of its stake as a first step. 
    "It would be well received by shareholders and demonstrate 
the company takes the issues of corporate governance and 
achieving a high ROE (return on equity) and capital efficiency 
seriously," he added. 
 
 (Reporting by Simon Jessop and Sam Nussey; Editing by David 
Holmes/David Evans) 
 ((simon.jessop@thomsonreuters.com; +44)(0)(207 542 5052; 
Reuters Messaging: Reuters Messaging: 
simon.jessop.thomsonreuters.com@reuters.net)) 
 
Keywords: TOKYO BROAD SYS INVESTOR/ACTIVISM