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Kirin sees off challenge by activist fund seeking outside directors

Argument that company should focus on beer falls flat with other shareholders

A man wearing a face mask holds a sign for Kirin Holdings' annual general meeting in Tokyo on March 27. (Photo by Yuki Kohara)

TOKYO -- Kirin Holdings has soundly defeated the challenge mounted by activist investor Independent Franchise Partners, which had sought to appoint two independent directors to the board of the Japanese drinks giant.

All 12 of Kirin's nominations for board positions were approved by investors at the company's annual general meeting on Friday, with 10 of them receiving approval rates of over 90%.

London-based FP, which has a stake of around 2%, had criticized Kirin's selection of directors as well as its diversification strategy.

FP needed the attendance of more than half of Kirin's voting shareholders and the backing of more than 50% of those attending for its proposal to succeed, a target that the fund had earlier acknowledged was "ambitious." The fund was also hoping to win approval for a share buyback, but that bid failed as well.

"Although we are disappointed at the result, our proposals have cast a spotlight on Kirin's KV2027 strategy and corporate governance," FP portfolio manager Michael Allison told the Nikkei Asian Review, referring to the company's long-term plan through 2027. "Our proposals had the positive effect of pressuring Kirin to put forth its own proposals for a majority independent board and executive compensation system more aligned with the interests of shareholders," he added.

The two candidates put forth by FP were Nicholas E. Benes, a financial and legal expert, and Kanako Kikuchi, who has experience at global pharmaceutical companies. Benes who garnered a 35% approval rate at the meeting, while Kikuchi received a 20% support rate. The figures for all votes are preliminary, with the final numbers to be announced on March 30, according to the company.

Kirin, for its part, stressed that over half of its nominees are outsiders.

"I would not say Kirin's board is truly independent, but I would never oppose [Kirin's] 12 nominated directors," a 76-year-old private investor surnamed Shibata told Nikkei.

FP's other proposal -- to offer a 600 billion yen ($5.53 billion) share buyback by selling its health business -- was backed by just 8% of those who voted.

The activist fund had opposed Kirin's strategy of diversifying away from its core beer business, saying the company's share price has suffered because of its acquisition of a biochemical business from Kyowa Hakko Bio and its purchase of a 33% share of Fancl, a health supplement and cosmetics maker.

Other shareholders, however, did not seem to agree.

Masahito Sakai, a 47-year-old private investor, argued that Kirin cannot succeed by focusing only on beer. "I'll leave [its strategy] to Kirin, they can do what they want," he said.

Another private shareholder, who declined to be named, agreed. "It's scary to focus on only the beer business, as the [domestic] market is shrinking. It would be good for Kirin to take a balance between beer, medical and health business."

Kirin CEO Yoshinori Isozaki told reporters after the shareholder meeting that the outcome "is the result of gaining the understanding of many shareholders for our long-term strategy." With challenges like the coronavirus outbreak facing society, Isozaki said, "we will expand our health science business by utilizing biotechnology."

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