Dalton/NAVF today failed in its attempt to replace Fuji Media’s board at its AGM. The voting results are not yet available, but they will make for interesting viewing.
Tokyo Cosmos Electric
While much lower profile than Fuji Media, activist fund “Global ESG Strategy” (GES), operating on the Swiss Asia platform, did succeed this week in replacing the Board of Tokyo Cosmos Electric, assisted by a Chinese group who had also proposed their own directors for the Board, and were also successful in having them elected.
Interestingly, Monden-san, the principal of GES, is one of the new directors, and is taking on the role of Chairman and President of the company.
Tokyo Cosmos had previously announced a proposed tender offer for the company from one of its US domiciled suppliers, at a small premium. The company’s statement indicated they had been in discussions with the supplier since late 2024. Matters appear to have been accelerated by an indicative non-binding proposal from an unnamed shareholder to privatise the company – presumably this was GES – and then by the shareholder proposals to replace the board. The indicative proposal was only announced to the market buried in the company’s tender offer statement, but it serves somewhat to validate a key facet of Senjin’s proposed strategy aimed at accelerating the engagement timeline.
The agreed transaction must now be up in the air given the change in control. It will be interesting to observe proceedings from here, not only whether the deal goes ahead, but also Monden-san’s approach to running a public company. Will he use this as a vehicle to take activist positions? Or will it be more about friendly M&A?
There was no smoking gun in this case, so why were shareholders able to replace the board? Put simply, it was a matter of the composition of the shareholder register. The proposing shareholders controlled ~35% of the vote, there was minimal allegiant holding, no index funds and minimal institutional ownership. Retail shareholders often do not vote, so 35% can in some cases represent more than 50% of votes cast.
Contrast this with Fuji Media, where the group of activist shareholders had to contend with index funds, cross-shareholders, and domestic asset managers who are often inclined to vote with management provided their voting guidelines are met and there is no evidence of malfeasance.
Helios Techno & Hogy Medical
While Dalton’s Fuji Media campaign received a setback, it has seen tangible results with Helios Techno and Hogy Medical. Dalton, together with Black Clover derailed an agreed take-private for Helios that, despite offering a 74% premium, still valued the company at a negative adjusted enterprise value.
Faced with a failed tender offer, and activist shareholders approaching 40% of the vote, Helios appears to have taken an “if you can’t beat ‘em, join ‘em” approach. The company concluded an agreement with Dalton’s associate, Rising Sun, which has seen Helios establish a new subsidiary to carry out M&A utilising Rising Sun’s expertise. Rising Sun gets two executive directors appointed to Helios’ board, including Dalton’s head of research for Japan.
Again, this is one to watch. Are we seeing the birth of an activist-created Berkshire-Hathaway / Danaher / Constellation? Or will this be something different?
Dalton founder Jamie Rosenwald is not one of the director appointees for Helios, but he has gained a seat on the board of Hogy Medical. Together with GMO and Goodhart Partners (who also own a substantial minority stake in Japan activist manager Asset Value Investors), Dalton/NAVF pressured the company into buying out the founding family and appointing a CFO, who was formerly a director with engagement fund Taiyo Pacific. Taiyo happens to be not only Toby’s previous shop, but also the former employer of GMO’s Japan CIO, Drew Edwards. That CFO has now been made CEO.
Hogy is a great example of activists gaining effective control without trying to replace the board at a contested AGM. Together they hold 47% of the voting rights.
There appears to be considerable scope to roll up the medical supplies industry, and we should expect Hogy to be a consolidator going forward.
