*Oasis proposes dismissal of Hokuetsu CEO
Sekio Kishimoto at upcoming AGM * Oasis nominates five new
highly qualified, independent, and diverse director candidates
*Oasis urges Hokuetsu shareholders to vote FOR Oasis’s
proposals *Oasis calls for Hokuetsu to transform corporative
governance to build a best-in-class business for all
stakeholders
More information available at
www.HokuetsuCorpGov.com
Oasis Management Company Ltd. (“Oasis”) is the manager to funds
that beneficially own approximately 18% of Japanese paper
manufacturer Hokuetsu Corporation (3865 JT) (“Hokuetsu” or the
“Company”). Oasis has adopted the Japan FSA’s “Principles of
Responsible Institutional Investors” (a/k/a the Japan Stewardship
Code) and in line with those principles, Oasis monitors and engages
with its investee companies.
Oasis has been engaging with Hokuetsu since 2019 in an effort to
help improve the Company’s corporate governance and corporate
value. However, Oasis firmly believes that CEO & President
Sekio Kishimoto’s poor leadership and a lack of oversight by the
Company’s current independent directors are holding Hokuetsu back
from achieving its full potential.
Mr. Kishimoto and Hokuetsu’s independent directors have a long
track record of governance and business management missteps,
including:
- A long history of failure to realize synergies with Daio Paper
Corp. (“Daio”) and refusal to sell Hokuetsu’s strategic
shareholdings, incurring significant economic loss;
- Announcing a Strategic Alliance with Daio, of which the
economic benefits to the Company are only nominal due to regulatory
constraints and the inherent conflict of interests between the two
parties;
- Overseeing subpar Company performance during extremely long
tenures; and
- Failure to implement effective and meaningful corporate
governance, as demonstrated in the reinstatement of a poison pill
to protect their vested interests.
Therefore, we urge fellow shareholders to act now to hold
management accountable, improve corporate governance, and help
build a better Hokuetsu by voting FOR Oasis’s proposals at the upcoming AGM:
- Dismissal of Mr. Kishimoto as a director
- Dismissal of Mr. Iwata, Mr. Nakase, Mr. Kuramoto and Ms. Nihei
as independent directors
- Election of five highly qualified, truly independent, and
diverse independent director candidates (Ms. Shiba, Mr. Nysten, Mr.
Nakajima, Mr. Baisley and Mr. Watanabe)
- Introduction of a new compensation plan for the independent
directors:
- Determination of individual base remuneration for independent
directors
- Determination of remuneration for granting restricted stock to
independent directors
Background – Corporate Governance
Failures at Hokuetsu
We believe the Company’s corporate governance framework has been
rendered ineffective by Mr. Kishimoto’s effective control over the
board. The independent directors have failed to provide appropriate
oversight, and thus have failed in their duty to hold him
accountable for his track record of shortcomings during his 16-year
tenure as CEO and President.
These governance shortcomings are perhaps best exemplified by
the Company’s December 2023 reinstatement of a poison pill aimed at
preventing Daio Kaiun from increasing its stake. Hokuetsu had
previously abolished its poison pill in June 2022.
Based upon publicly available information, there is no reason to
believe that Daio Kaiun was accumulating its equity stake with an
intention to acquire managerial control. In the absence of such an
attempt to acquire managerial control, we can hardly believe that
the poison pill was justifiable as a means to protect the Company’s
stakeholders. Instead, Oasis believes that the poison pill was used
by Mr. Kishimoto and his Hokuetsu directors to preserve their
managerial positions against Daio Kaiun’s plan to vote against
their nomination as directors.
We note this is in direct contradiction to the Ministry of
Economy, Trade and Industry (METI) Guidelines for Corporate
Takeovers:
“[T]akeover response policies should not
be intended to protect or entrench management from ‘parties who are
undesirable to the incumbent management’.”1
As noted, Oasis has been engaging closely with the Company, both
privately and publicly, over the span of several years, addressing
a host of operational and governance improvements. Regrettably, the
Company has consistently failed to respond to our efforts for
change. Despite Oasis’s repeated requests, and notwithstanding our
status as the Company’s largest shareholder for years, and current
status as the Company’s second-largest shareholder, we have been
granted an audience with Mr. Kishimoto just once, in December 2023,
after five years of engagement.
Engaging with shareholders is a fundamental duty of management
under the Corporate Governance Code. We see this reluctance alone,
over the past five years, as a serious breach of governance.
In what appears to be management’s latest attempt to protect its
own interests and positions at the Company from facing
accountability, in its announcement published on April 23, Hokuetsu
has publicly called into question the accuracy of Oasis’s large
shareholder reports with respect to Oasis’s holdings in the
Company. This statement by the Company is not only inaccurate and
baseless, but also defamatory and extremely reckless, and
demonstrates the failures of corporate governance plaguing the
Company that must be remedied through the appointment of truly
independent directors at the upcoming AGM.
Finally, in a recent correspondence, the Company charged that,
should Oasis’s proposals succeed at the AGM, Oasis would, through
the independent directors, effectively gain control over the
Company. We are shocked and deeply dismayed by this gross
misunderstanding and misinterpretation of both our intentions and
the fundamental principles of corporate governance. We
categorically state that our director candidates are truly
independent and have been selected based on their expertise,
integrity, and commitment to upholding the highest standards of
corporate governance. Their role is to serve the best interests of
all shareholders, and not to advance any particular agenda.
We firmly believe that our proposals for a change at the board
level will lay a crucial foundation for Hokuetsu to enhance its
corporate governance and embark on a trajectory of improving
corporate value for the benefit of all stakeholders.
Seth Fischer, Founder and Chief Investment Officer of Oasis,
said:
“Mr. Kishimoto and Hokuetsu’s independent directors have acted
against shareholder interests by reintroducing a poison pill. This
Company deserves new independent directors to help guide Hokuetsu
to overcome its challenges, like navigating the shrinking paper
products market, pursuing decarbonization and logistics reforms,
and fostering sustainable growth. We urge all shareholders to vote
to remove Mr. Kishimoto and all four incumbent independent
directors to restore appropriate governance and empower Hokuetsu to
realize its full potential.”
We call on all shareholders who care about improving
Hokuetsu’s governance and corporate value to vote FOR Oasis’s proposal to dismiss Mr. Kishimoto
as President and Representative Director, dismiss all four
incumbent independent directors, and to elect the five highly
qualified, independent, and diverse director candidates nominated
by Oasis as independent directors at Hokuetsu’s AGM.
To learn more about Oasis’s proposals, please visit
www.hokuetsucorpgov.com. We welcome all stakeholders to contact
Oasis at info@hokuetsucorpgov.com to help improve Hokuetsu’s Corp
Gov through accountability now.
***
Oasis Management Company Ltd. manages private investment
funds focused on opportunities in a wide array of asset classes
across countries and sectors. Oasis was founded in 2002 by Seth H.
Fischer, who leads the firm as its Chief Investment Officer.
More information about Oasis is available
at https://oasiscm.com. Oasis has
adopted the Japan FSA’s “Principles of Responsible Institutional
Investors” (a/k/a Japan Stewardship Code) and in line with those
principles, Oasis monitors and engages with our investee
companies.
The information contained in this press release (referred to
as the "Document") is an information resource for shareholders in
Hokuetsu offered by Oasis, the investment manager to funds that are
shareholders of Hokuetsu (the "Oasis Funds"). The Document is not
intended to solicit or seek shareholders' agreements to jointly
exercise any voting rights with Oasis. Shareholders that have an
agreement to jointly exercise their voting rights are regarded as
Joint Holders under the Japanese large shareholding disclosure
rules and they must file notification of their aggregate share
ownership with the relevant Japanese authority for public
disclosure under the Financial Instruments and Exchange Act. Oasis
does not intend to be subjected to such notification requirement.
The Document exclusively represents the opinions, interpretations,
and estimates of Oasis in relation to the upcoming 186th Ordinary
General Meeting of Shareholders of the Company. Oasis is expressing
those opinions solely in its capacity as an investment advisor to
the Oasis Funds.
_____________________
1
Guideline for Corporate Takeovers. Section
5.1, Approach on Takeover Response Policies and Countermeasures.
METI.
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