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Rising Sun Holdings urges Japan’s Intage to consider MBO


Rising Sun Holdings, the adviser to one of the more successful London-listed investment trusts, Nippon Active Value (LON:NAVF), has written to the management of Intage Holdings (Tokyo:4326), urging the company to consider an MBO offer. Intage is a Japanese market research firm which is looking at some serious shareholder activism at the moment, something which has been alien to many Japanese companies until recently.

Rising Sun has combined with two other big investors, namely Earl 1927 LLC and Michael 1925 LLC, to form an investor group to apply pressure on the company. Together they control a 10.7% stake in Intage stock (Nippon Active Value has roughly half of that).

The investors have argued that Intage has a lack of widely held stock incentives for management and employees, has followed an unsuitably expansionist acquisition policy, which has failed to provide sufficient financial returns, and has made slow progress in terms of digitising operations. They point to a general lack of automation within the firm.

Management buyout demand

“We urge Intage Holdings to undertake immediate preparations to organise a management buyout that will comply with the Japanese government’s continued policy to align employee compensation with the economic interests of the company’s owners,” said Paul ffolkes Davis, Chairman of RSM, the investment advisor to Nippon Active Value Fund.

Nippon Active Value is an activist investor which draws on the Rising Sun team’s significant Japanese market knowledge and their two decades of successful intervention to generate uncorrelated returns.

Many Japanese companies are under-researched, show rising balance sheet cash reserves and have questionable capital allocation policies. Nippon Active Value seeks to engage with investee company management teams to promote value-enhancing corporate reorganisation and capital allocation strategies that can result in significantly improved returns for stakeholders, including both employees and shareholders.

How the trust’s activist approach works in Japan

In 2021, Nippon Active Value, having acquired a 6% stake in Sakai Ovex, then led a campaign to pressure the company’s management to conduct an MBO, arguing that the firm was significantly undervalued by the market. The investment trust first proposed an MBO at ¥2350, and after being joined by like-minded investors, this eventually rose to ¥3810. The successful MBO crystalised a more than 100% gain for the fund’s investment in Sakai Ovex.

Shares in Intage Holdings were up over 5% in trading in Tokyo today. The stock price has slipped from a recent peak of ¥2060 which it achieved in November. The company is trading well above its 52 week low and currently has a PE ratio of just under 20x. It has a dividend yield of 2.1% and a beta of 0.82.

Nippon Active Value is a relatively recently listed investment trust, in the Japanese smaller companies space. It has just under GBP 150m in assets under management at last count. Its share price total return is 23.4% versus -23.4% for the AIC Japanese Smaller Companies sector overall. It has not been in the market long enough to compile a three year track record, but its current approach in the target rich Japanese corporate segment seems to be paying dividends.

Intage Holdings is currently the trust’s biggest position, at slightly over 15% of its net assets. Mitsuboshi Belting (Tokyo:5192) is its second largest stake, at just over 9%.

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This article does not constitute investment advice. Make sure you do your own research or consult a professional advisor.

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