Activist fund targets maker of Maruchan ramen noodles over governance, sources say
16/05/2022 11:06
By Makiko Yamazaki
TOKYO, May 16 (Reuters) - A Singapore-based activist
investor is pressing the Japanese maker of "Maruchan" ramen
noodles to improve group governance and explain why a
majority-owned subsidiary remains listed, two people familiar
with the matter told Reuters.
Vasanta Master Fund has filed shareholder resolutions ahead
of the June annual general meetings of Toyo Suisan Kaisha Ltd
2875.T and its 50.9% owned subsidiary, Yutaka Foods Corp
2806.T , according to the people, who spoke on condition of
anonymity because the information was not public.
In letters to both companies sent last month and reviewed by
Reuters, the hedge fund said there was a "high risk" of a
conflict of interest in transactions between the two, given the
stronger position of Toyo Suisan. Both the chairman and
president of Yutaka Foods are from its parent.
Representatives for Yutaka Foods and Toyo Suisan declined to
comment.
Vasanta's resolutions highlight so-called "parent-child
listings" that remain prevalent in Japan despite official
attempts to encourage companies to sell off or buy out listed
units. Governance experts say such listings are unfair to
subsidiaries' minority shareholders, whose interests may take a
back seat to those of the parent company.
Yutaka Foods purchases most of its raw materials from Toyo
Suisan, which are then processed into noodles and other packaged
foods that are mostly sold back to the parent, according to
recent company filings.
Toyo Suisan's "Maruchan" ramen noodles are a staple for
university students in North America. It is the market leader
for instant noodles in both the United States and Mexico.
Vasanta, managed by Singapore-listed investment firm TIH Ltd
TIHL.SI , is Yutaka Foods' second-largest shareholder with
nearly 5% and holds a small stake in Toyo Suisan, according to
the sources.
The fund has also proposed that Yutaka increase dividends
and create an audit committee to strengthen corporate
governance, according to its letter to the company.
While some 260 listed subsidiaries remain among Japan's
roughly 3,700 listed firms, according to Tokyo Stock Exchange
data, some high-profile firms have addressed the "parent-child"
issue in recent years.
Hitachi Ltd 6501.T has sold or taken control of more than
a dozen listed subsidiaries, including Hitachi Chemical. Nippon
Telegraph and Telephone Corp (NTT) 9432.T launched a $40
billion buyout in 2020 to take its wireless business private.
(Reporting by Makiko Yamazaki; Editing by David Dolan and
Edmund Klamann)
((Makiko.Yamazaki@thomsonreuters.com; +81-3-4563-2805;))