Japan drugstore Tsuruha, facing activist pressure, says its board needs insiders
19/07/2023 08:17
By Makiko Yamazaki and Ritsuko Shimizu
TOKYO, July 19 (Reuters) - Tsuruha Holdings' 3391.T
board has industry insiders with knowledge and networks which it
needs to lead a successful M&A strategy, the president of the
Japanese drugstore chain said, spurning an activist
shareholder's call for a board overhaul.
Tsuruha faces a proxy battle with Hong Kong's Oasis
Management which seeks to reshuffle the board with its own
outside director nominees, arguing that the current one
dominated by founding family members could impede the drugs
distributor from fairly evaluating consolidation opportunities.
"We have been very proactive in industry consolidation and
produced results," Jun Tsuruha told Reuters in an interview on
Wednesday.
"Our M&A strategy should be best carried out by someone with
deep networks in this industry, where many players are owned by
founding families by large percentages," he said.
Tsuruha's stance could offer a pathway for the management of
Japan's fragmented drug sector to try and counter potential
demands from activist investors as the industry gears up for
consolidation.
Deep expertise and connections in the local market are
especially important, the president said.
Tsuruha, himself from the founding family, also dismissed
Oasis' proposal that the new board of directors, if elected, set
up a strategic committee consisting of outside directors to
consider mergers and acquisitions (M&As).
The idea of letting new outside directors with little
knowledge about the company and industry situation lead M&As is
"unrealistic", he said.
Oasis, which owns 12.8% of Tsuruha, says the search for a
consolidation partner is "an urgent management issue for
Tsuruha". The fund made specific proposals on who the company
should merge with, giving three rivals' names, according to
Tsuruha.
Tsuruha will hold its annual general meeting on Aug. 10.
Jun Kawahara, senior analyst at Daiwa Securities, said
consolidation of the Japanese drug sector would proceed
regardless of the outcome of Oasis' campaign against Tsuruha.
"Consolidation among big players is increasingly inevitable
as top 10 players now control 80% of the market, compared to
about 30% around 2000," he said.
Investors say retail giant Aeon 8267.T , Tsuruha's largest
shareholder with a 13% stake, is crucial to the proxy fight.
Placing the drugstore business as one of key growth drivers,
Aeon also owns 51% of Welcia Holdings 3141.T and 10% of Kusuri
No Aoki Holdings 3549.T .
It has been quiet about Oasis' proposals.
(Reporting by Makiko Yamazaki and Ritsuko Shimizu; Editing by
Muralikumar Anantharaman)
((Makiko.Yamazaki@thomsonreuters.com; +81-3-4563-2805;))