Thursday, May 29, 2008

Steel Partners Kicks Out Aderans Board

Reuters reports that Steel Partners, the US hedge fund, leveraged its 26.7% stake in Aderans, the Japanese wigmaker, to block reappointment of seven board members, sparing only the two newly-appointed outside directors.

A few thoughts:

It has profited some from firms hiking their dividends, but it was slapped back last year when a Tokyo court backed the use of a "poison pill" anti-takeover defense by sauce maker Bull-Dog Sauce Co <2804.T> to thwart the fund's bid.

When will the media realize that Steel Partners actually made a killing on that bid? And isn’t that the point of it all?

ADD: Does the writer really think that it’s the dividends that Steel Partners are after?

Blocking the reappointment of board members will be seen as a landmark win for the fund.

It will be a “landmark win” for Steel Partners only if it cashes out with profits.

"This is in effect the first time where a fund and others have taken the lead and minority shareholders have pushed out management," said Nomura Securities strategist Kengo Nishiyama.

Since when is the largest shareholder a minority shareholder? Something got lost in translation.
My thanks to Janne for the correction.

Seriously, in a land where hair transplants have never really caught on, wigs are big, and Aderans is the bigwig of wigs. Still, it’s a big fish in a small pond. In fact, the four other companies mentioned as Steel Partners targets—brewer Sapporo Holdings Ltd, confectionery maker Ezaki Glico, false teeth maker Shofu Inc, and spice producer House Foods Corp—are more or less in the same fishpond*. Basically limited to the domestic market, they’re all small enough to catch, yet big enough to make the chase worthwhile.

Now if someone went after Hitachi, this would be a whale of a catch.

* Okay, Shofu Inc. is probably small fry, but you see my point.

ADD. 12 July 2008: I received a proposal for a linkage exchange from Legal Ace, a legal documentation firm. Legal Ace appears to be a legitimate business with a real-world office, and it is somewhat flattering to have this specific post called a "resource". So here goes:

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Janne Morén said...

The largest shareholder is still a minority shareholder if it controls less than 50% of the company. The largest shareholder by definition holds a plurality, but needs more than half the shares to hold a majority.

Jun Okumura said...


Always good to hear from you. Now you have come up with a perfect definition of “minority”. But “minority shareholder” has meaning only within the proper context. Look at this definition:

A shareholder holding less than 50% of the voting rights attached to the equity and accordingly subject to the control of another shareholder or group of shareholders with the majority. There is a further 25% threshold below which the minority can prevent special resolutions being passed.

Here’s an example of its useage. And another. In fact, these three Internet documents—all of them talking about minority shareholders in contrast to the majority shareholder—were the first ones to come up when I googled “minority shareholder”.

The Nomura strategist used the term outside of its proper context. In fact, a 26.7% stake should often be big enough to control a company where there are no other significant shareholders or cohesive group of shareholders, interlocking or otherwise. So what was the deal? The Reuters writer didn’t do the homework, that’s for sure.

Janne Morén said...

That makes them a minority shareholder according to that definition too: shareholder holding less than 50% of the voting rights. I don't see what you mean, unfortunately.

Jun Okumura said...

Actually, Janne, I've thought it over, and you're right. So my original comment doesn't really make sense after all.

Sorry. My mind seems to be wandering a bit lately.

MTC said...

Okumura-san and Herr Morén -

Some of the other unwashed denizens of the blogoshere are having a lively discussion of the merits of yesterday's takedown over at Cassandra Does Tokyo:

Jun Okumura said...

Why I'll have you know that I take a bath at least once a week, like the old Boy Scouts Manual used to remind its members!