TOKYO (Reuters) – U.S. hedge fund Steel Partners won a seat on the board of Aderans Holdings Co (8170.T: Quote, Profile, Research, Stock Buzz), increasing its influence over the wig maker in a landmark case for activist investors in Japan.
In late May, Steel Partners helped oust president Takayoshi Okamoto and most of the board of Aderans, the first time management of a Japanese company had been ejected under pressure from an activist fund. [ID:nT203406]
Aderans announced on Monday that Kiyoshi Hayakawa, president of women's wig maker Fontaine, would become its new president. It also appointed Joshua Schechter, a managing director at Steel Partners, as an outside director.
The shake-up at Aderans has become a symbol of progress for activist investors, which until now have been mostly knocked back in their attempts to squeeze higher returns out of poorly performing Japanese companies.
But Steel Partners, which is Aderans' top shareholder with a 26.7 percent stake, now faces the burden of actually proving that activist funds can be a force for good.
“If the new management team at Aderans succeeds in improving the share price, that would be a huge development,” said Marc Goldstein, head of the Japan research department at corporate governance consulting firm RiskMetrics Group.
“If not, it will be hard in the future to convince shareholders to support drastic changes,” he said.
Steel Partners, which had criticised previous management for falling profits and proposed “strategic alternatives” such as finding someone to takeover the company, said it was happy with the appointments and would work with the new board.
Aderans named Hironori Aihara, a former senior executive at trading house Mitsubishi Corp (8058.T: Quote, Profile, Research, Stock Buzz) with extensive experience in the United States, as an outside director alongside Schechter.
The wig maker also said it has asked investment bank Nikko Citigroup to explore strategic alternatives. It did not elaborate.
“We welcome and applaud these important steps by Aderans to enhance corporate value and to identify the strongest possible future direction for the company,” Warren Lichtenstein, managing partner at Steel Partners, said in a release.
“Recent events at Aderans clearly demonstrate that shareholders in Japan can no longer be ignored and are ready to assert their right to influence the direction of companies in which they invest.”
Aderans posted a 51 percent fall in operating profit for the year ended Feb. 29, citing tough competition in the Japanese market. It sees profit rebounding by a third to 5.4 billion yen in the current business year.
Prior to the announcement, shares in Aderans closed up 3.7 percent at 2,050 yen, rising after the company said during afternoon trade that it would announce a new management. The current price values the company at about $805 million.
(Reporting by Junko Fujita, Yumiko Nishitani and Nathan Layne; Editing by Jean Yoon)