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Activists step up investments in Japanese companies

Elliott Management and others believe proposals now have easier path to success

Sony has rejected an activist proposal that it spin off its sensor business. (Photo by Akira Kodaka)

NEW YORK -- Activist investors are circling Japan Inc.

A tally by Nikkei shows that in the first eight months of this year 139 cases of fresh or additional stock purchases were made specifically so that activist investors could present management with significant proposals.

These investors believe they now have more of a chance of having their proposals accepted by Japanese companies. Their buying is likely to accelerate.

There are increasing cases of activist investors encouraging companies to improve operations from a long-term perspective so that they can win the support of other institutional investors.

Two major U.S. fund managers this year have made notable purchases of Japanese stocks. Elliott Management, known for going to court to collect debt from the Argentine government, purchased 10% of Tokyo property-leasing company Unizo Holdings. In another case, Third Point again acquired Sony shares.

Trian Partners of the U.S. recently dispatched an executive to Japan to conduct in-depth market research. The company plans to invest in consumer-related brands; Japan will be its first steppingstone into Asia.

During the 2000s, activist investors often landed in Japan demanding that companies increase dividends or conduct share buybacks. This time, their proposals are more diverse. Recently, some have called for divesting money-losing units, nominating directors and disclosing executive compensation packages in the name of good corporate governance and capital efficiency.

Their proposals also appear to be tailored to a growing investor regard for companies' environmental, social and governance records.

Nikkei counted the number of shares acquired for the purpose of making "important" proposals by shareholders holding at least 5% of a listed company, as reported to the Finance Ministry in a mandatory disclosure document.

In the tally made a year ago, the figure totaled 128.

The figure for the first six month of this year means Japan was No. 2 in the world in terms of activist investor bustle. The U.S. was No. 1. According to a research company Activist Insight, the number of demands made to Japanese companies totaled 42, far behind the U.S.'s 350 but exceeding the U.K.'s 38 and Australia's 37. Japan ranked third in the first half of 2018.

Nikkei staff writers Daisuke Maruyama and Saki Masuda in Tokyo contributed to this report.

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