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Lixil chief quits amid pressure from overseas investors

Boardroom battle intensifies as ousted CEO eyes return at building supply group

Lixil headquarters in Tokyo. Foreign investors own about 40% of Japan's largest supplier of building materials. (Photo by Koji Uema)

TOKYO -- The embattled chief of top Japanese building materials supplier Lixil Group will step down from all his posts at the company ahead of a shareholders meeting in June at which his ousted predecessor will seek to rally support from overseas investors.

The Tokyo-based company said Thursday that Chairman and CEO Yoichiro Ushioda, a member of one of the group's founding families, will resign as a director on May 20.

Ushioda added at a news conference that he intends to resign from his remaining posts in June. President and Chief Operating Officer Hirokazu Yamanashi will also quit as a director that month.

The boardroom departures are the latest development in a clash between Ushioda and the previous president and CEO, Kinya Seto, who was abruptly dismissed last October in a move questioned by shareholders including BlackRock and Marathon Asset Management.

The focus now turns to June's annual meeting. Plotting a return as CEO, Seto, who remains a director, said Thursday that he nominated a slate of eight new Lixil directors to the board in a shareholder proposal.

Lixil, whose brands include American Standard, Inax and Grohe, also said Thursday it will book a 53 billion yen ($473 million) net loss for the year ended March due mainly to write-downs on Italian subsidiary Permasteelisa. A deal to sell the money-losing unit to a Chinese construction company was scrapped last year after it showed no prospect of winning approval from U.S. authorities.

"Although Seto is responsible for the huge loss, I feel responsible for inviting him to join the company," Ushioda told the news conference, explaining his decision to resign.

Overseas investors hold about 40% of Lixil's shares, while Ushioda only has a roughly 3% stake. Support for Seto, a former Asia executive for building supplier W.W. Grainger who went on to start his own company, is also growing among Japanese institutional investors.

Ushioda had faced the possibility that his opponents would muster enough votes to remove him from the board at an extraordinary shareholders meeting sought by a group of investors.

Lixil's nominating committee will choose its own slate of director and executive officer candidates for the June meeting. A proxy fight with Seto and the shareholder consortium could ensue if the nominees are believed to be under Ushioda's influence.

The nominating committee "lacks transparency" given that "many directors, including independent ones, showed deference to Ushioda," an independent lawyer said in a report concerning Seto's murky resignation last year. Lixil had acknowledged after a recent investigation that misleading remarks by Ushioda led to Seto's exit. The company said Ushioda had suggested that Seto wanted to quit, even though the latter had no such desire.

Holding his own news conference Thursday, Seto said "Ushioda's reason for resigning is a downturn in performance, but he is changing the subject to avoid an extraordinary shareholders meeting."

Ushioda said he would "consider becoming an adviser if asked," while Yamanashi pledged to "focus all his energy on being COO if told to continue" after June's ordinary general shareholders meeting.

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