By Eric Pfanner
TOKYO-- Fanuc Corp., a secretive but highly profitable Japanese
maker of industrial robots and machine tools for customers such as
Apple Inc., said it would consider giving some of its growing cash
reserves to investors, following pressure from a New York hedge
fund that recently invested in the company.
Analysts described the move as a big victory for Prime Minister
Shinzo Abe's campaign to make Japanese companies, known for their
meager investment returns, more responsive to shareholder
interests.
Fanuc shares jumped 13% on the Tokyo Stock Exchange Friday,
helping push the benchmark Nikkei Stock Average up 1.4% to close at
its highest level since April 2000.
"It's a big surprise," said Yukihiro Kumagai, an analyst at
Jefferies & Co. "If what they are talking about is true, this
is a significant shift for shareholders."
Fanuc said it would consider buying back shares and raising its
dividend, two steps sought by the fund Third Point LLC, which last
month disclosed a stake in Fanuc. Third Point said at the time that
the company "reminds us of Apple in its product approach," but
criticized it for hoarding about $8 billion in cash and for a lack
of transparency with investors.
Fanuc President Yoshiharu Inaba said in an interview with
Japanese business daily the Nikkei, published Friday, that the
company would set up a "shareholder relations" department in an
effort to improve communications with investors. Until now Fanuc,
based in a forest near the foot of Mount Fuji, has been known as
one of Japan's most insular companies, brushing off meeting
requests from analysts and investors.
Mr. Inaba said the company had yet to meet with Third Point,
which is headed by Daniel Loeb, but would consider doing so once it
confirmed the fund's investment in Fanuc. He said the latest moves
had no connection with Third Point but were prompted by Japan's new
corporate governance initiatives.
Japanese companies have been known for holding large amounts of
cash in reserve. Investors such as Mr. Loeb say the money could be
put to work more productively, and they appear to have an ally in
Mr. Abe. His administration has introduced shareholder-friendly
measures, including a new stewardship code for institutional
investors, calling on shareholders to engage more actively with
companies, and a corporate governance code for companies listed on
the Tokyo Stock Exchange.
"Improved shareholder relations and capital allocation policies
will undoubtedly highlight how undervalued Fanuc's shares are
today, considering the company's dominant positioning in areas with
enormous impending structural growth," Third Point said in a
statement.
Fanuc declined to comment beyond the newspaper interview. Last
month, shortly after Third Point disclosed its investment, Fanuc
said it would spend Yen130 billion on new production and research
sites in Japan. At that time it announced no immediate changes in
its use of cash.
Mr. Inaba said in the interview published Friday that Fanuc's
cash level of nearly Yen1 trillion was appropriate, given the
cyclical nature of the industry. But he added that when the cash
reserves reached that level, the company would change direction in
favor of shareholders.
He said Fanuc would consider raising its dividend, currently
30%, and buying back shares, subject to market conditions. The
shares have been rising since Mr. Loeb disclosed his investment,
making a buyback less attractive to the company in the near
term.
Mr. Inaba also said Fanuc would consider canceling treasury
shares that it has held since buying them back from Fujitsu Ltd.,
the electronics giant from which Fanuc was spun off in 1972. Such a
move would increase the stakes held by outside shareholders in
percentage terms.
Write to Eric Pfanner at eric.pfanner@wsj.com
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