TOKYO -- Effissimo Capital Management has raised its stake in Japan's Kawasaki Kisen to more than one-third, stirring questions of how the fund's activist leanings will influence the use of its eventual veto power over key decisions.
The Singapore-based fund, founded by traders with roots in activist investor Yoshiaki Murakami's fund, now holds a 34.11% stake in the marine shipper, a large-shareholder report submitted recently shows. Effissimo first acquired a 6.18% stake in Kawasaki last August and has steadily expanded its holdings.
Kawasaki shares are underpriced compared with the company's potential value, Effissimo Director Takashi Kousaka has said. The shipper's price-to-book ratio was 0.61 as of Friday, and its cash and deposits totaled 241.1 billion yen ($2.25 billion) at the end of March, exceeding its 218.8 billion yen market capitalization at the time. The potential for those funds to be used in shareholder returns may have caught Effissimo's eye.
Kawasaki's general shareholder meeting is June 24. But voting power there is based on shares held March 31, so Effissimo will not have the greater than one-third necessary for veto power. Still, the fund will have plenty of sway over the proceedings, given its holdings of just under 30% at the fiscal year-end.
Effissimo insists it is interested in Kawasaki purely as an investment. But those within the company have doubts. "We have no idea what they're going to say" at the meeting, a Kawasaki executive said. "In any case, we don't want to provoke them."
The hedge fund is thought to have several hundred billion yen parked in Japanese stocks. Its holdings include shares in electronics retailer Yamada Denki, Dai-ichi Life Insurance and electronics company Ricoh, according to large-shareholder reports submitted this year. The fund revealed in March 2015 that it held more than a 30% stake in Saison Information Systems.
Over the past several years, Effissimo has made contact with a number of its investment targets via letter. The fund "puts particular importance on the rights of small shareholders, and is quite interested in its targets' corporate governance," said Hitoshi Sugibuchi, representative director of Sessa Partners.