TOKYO & HONG KONG – (COMMERCIAL THREAD) – Oasis Management Company Ltd. (“Oasis”) is the manager of private funds which own shares of NIPPO Corporation (“NIPPO” or the “Company”) (1881 JT) and its parent company, ENEOS Holdings Inc. (“ENEOS”) (5020 JT Oasis has adopted the âPrinciples for Responsible Institutional Investorsâ of the Japan FSA (a / k / a Japan Stewardship Code) and, in accordance with these principles, Oasis monitors and collaborates with its issuing companies.
As an actively engaged shareholder of NIPPO since 2016 and a shareholder of ENEOS, Oasis is deeply disappointed by the announcement of the planned tender for NIPPO. The offer of just JPY 4,000 per share for the minority shareholders of NIPPO and the expected repurchase price of JPY 2,859 per share for the shares of ENEOS significantly undervalues ââNIPPO and its assets, destroying value for all shareholders .
We believe that this unfair price could only have resulted from a significantly flawed transaction process that does not meet the standards set by the âFair M&A Guidelinesâ of the Ministry of Economy, Trade and Industry. Oasis estimates that a fairer price for NIPPO would be above JPY 5,600 per share.
This operation is not a classic case of a parent company privatizing its subsidiary. There is no question here of creating synergies between the two companies to generate long-term growth in the value of the company for all stakeholders. This is in effect a change of control transaction, with the majority of the economic rights being transferred to Goldman Sachs (the âBuyerâ). Although ENEOS retains 50.1% of the voting rights, this convoluted structure will lead ENEOS to reduce its stake in NIPPO to only 35% (or 25.05% if the call options are exercised on a new listing of NIPPO) . The Buyer will hold at least 65% of the economic rights (and up to 74.95% if he exercises his purchase options before re-listing).
The announced transaction is simply a financial arbitrage in favor of the Purchaser, taking advantage of the ease with which a majority shareholder can force cheap minority shareholders to re-register later, capturing the gap between the price paid and the actual price. of the company and assets. Consequently, both the minority shareholders of NIPPO and the shareholders of ENEOS are the losers in this transaction.
The tender dossier clearly specifies that the objective of this privatization is a future re-listing:
“The basic policy of GSSPC and ENEOS is to put the shares of the Target Company back on the market after improving the enterprise value of the Target Company through the Transactionâ¦ â
However, the details of any plan to achieve these so-called improvements in business value through the transaction are vague at best and do not address the domestic challenges and opportunities that NIPPO’s core businesses will face. the future. Improvements noted in the tender document include identifying foreign partners to increase sales and receiving information regarding real estate development – neither of which is particularly complex, and both of which can be achieved as well. well, if not better, by alternative partners and / or advisers. The vague plans to improve company value demonstrate that the main driver of value is the cheap price paid to minority shareholders.
Oasis has sent detailed letters to NIPPO and ENEOS outlining our governance concerns, our take on NIPPO’s deep undervaluation and flaws in the process, including, but not limited to:
No active market verification has been carried out.
No majority minority clause.
Concerns over the independence of independent directors responsible for protecting minority shareholders.
Erroneous valuation by Yamada Consulting Group, which does not include the value of real estate, cross-shareholdings and additional assets of NIPPO.
The Company’s special committee should ensure that minority shareholders receive the full value of the business and assets, rather than a premium over the share price which remains well below the fair value of the company. Society.
Oasis calls on NIPPO and the Special Committee to:
Perform active market verification to solicit a higher price and more significant synergies and benefits for NIPPO.
Renegotiate for a higher price for minorities.
Require a special dividend to fill the shortfall in fair value for minority shareholders.
Minority shareholders deserve a fair price and a fair process. Oasis will do everything in its power to protect the minority shareholders of NIPPO and ensure a fair price and process.
Oasis Management Company Ltd. manages private equity funds focused on opportunities across a wide range of asset classes across countries and sectors. Oasis was founded in 2002 by Seth H. Fischer, who heads the company as chief investment officer. More information about Oasis is available at https://oasiscm.com. Oasis has adopted the âPrinciples for Responsible Institutional Investorsâ of the Japan FSA (a / k / a Japan Stewardship Code) and, in accordance with these principles, Oasis monitors and collaborates with the companies in which we invest.
The information contained in this press release (referred to as the âDocumentâ) is an information resource for the shareholders of NIPPO and ENEOS offered by Oasis, the investment manager of the funds which are shareholders of NIPPO and ENEOS (the âFunds Oasis â).
The Document is not intended to solicit or seek shareholder agreements to jointly exercise voting rights with Oasis. Shareholders who have entered into an agreement to jointly exercise their voting rights are considered co-holders under Japanese large shareholding disclosure rules and must file a notification of their global shareholding with the Japanese authority responsible for the shareholding. public disclosure under the Financial Instruments and Exchanges Act. Oasis does not intend to be subject to such notification obligation. The Document exclusively represents the opinions, interpretations and estimates of Oasis.