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Activist fund pushes Kirin to accept two outside directors

FP says it is contacting other investors ahead of shareholders meeting

FP says that if Kirin accepts its two proposed outside directors and allows the board to independently review management's current strategy, it will withdraw its other demands.

TOKYO -- London-based Independent Franchise Partners (FP) on Wednesday changed tack in its efforts to convince Kirin Holdings to increase the value of its stock, giving the Japanese beverage group the names of two people it wants installed as outside directors.

"We offered to withdraw all of our proposals, including the proposal for a share buyback, subject to only two conditions," FP Managing Partner Hassan Elmasry said on a teleconference with reporters.

FP has held a 2% stake in Kirin for about five years, having bought in when Kirin's "stock price was quite low as a result of a long series of poor decisions by Kirin management," Elmasry said.

Last week, the Japanese brewer announced its opposition to FP's demands, including that it buy back 600 billion yen ($5.46 billion) worth of shares with proceeds from selling off noncore assets such as its 33% stake in Fancl, a maker of skin care products and health supplements.

Now FP is focusing on a request that Kirin appoint Nicholas E Benes, a financial and legal expert, as well as Kanako Kikuchi, who has experience at global pharmaceutical companies, as outside directors.

FP's other condition is that Kirin subject its current strategy "to a truly fresh and independent review by the new board, without pre-judgement or pre-conception," Elmasry said.

FP insists that Kirin's strategy of diversifying into the health and wellness sectors does not meet shareholders' expectations.

The U.K.-based investor has asked Kirin to focus on its core beer business, but the brewer has rebuffed the demand.

Elmasry stressed the need for more independent board members. "It is critically important that the [proposed] review be truly independent," he said.

With management sticking to its guns, the activist group says it has begun phoning and emailing other Kirin investors ahead of the company's annual shareholders meeting at the end of next month.

The campaign is targeting the top 100 shareholders and investors who have exercised voting rights in the past two years.

FP has also been communicating with other foreign shareholders who make up 35% of Kirin's investor base.

Last week, Kirin named four new directors to its board; the list does not include the names FP suggested.

A spokesperson for the brewer told the Nikkei Asian Review that the company decided on the new directors after considering FP's suggestion.

Kirin's latest board lineup includes medical and health science professionals, women and foreign executives. The brewer says that with the latest appointments, a majority of its board is made up of outside directors.

On Friday, Kirin President Yoshinori Isozaki told reporters that "it is impossible to achieve sustainable growth if we only focus on the beer business."

Kirin insists that it has no choice but to expand into sectors like health and wellness due to Japan's declining birthrate and young Japanese tendency to drink less beer. Kirin also says it fears that the World Health Organization will introduce regulations on alcohol.

"We have expanded our business using core technologies of fermentation and biotechnology," Isozaki said. "We will expand our health business based on these technologies."

FP also holds stakes in Nintendo and Japan Tobacco.

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