Activists Take Japan

May 29 2007 | 10:52am ET

Activist hedge funds are a globe-trotting set, and a pair have set their sights on several of Japan’s most prominent companies.

The Children’s Investment Fund has been pushing J-Power, Japan’s wholesale electric utility, to up its dividend, a move J-Power says would hurt growth. The two are heading for a confrontation at the company’s June 27 meeting, but TCI—best known for getting under the skin of European regulators for meddling in the affairs of Deutsche Börse and ABN Amro—has acknowledged it is finding difficulty gaining traction.

“The outcome will be unclear,” TCI’s Hong Kong chief, John Ho, told Reuters. “People are going to make a decision based on relationships.”

And the relationship math isn’t good for TCI, J-Power’s largest shareholder with a nearly 10% stake. Financial institutions own about 40% of J-Power and corporations about 10%. Foreigners own about 41.4% of the company.

Meanwhile, Bimingham, Ala.-based Harbinger Capital Partners is making rumblings about fighting a merger between two of the country’s largest restaurant chains.

In fact, there’s very little about the proposed deal between Doutor Coffee Co., which runs 1,500 coffee shops throughout Japan, and Nippon Restaurant System (Harbinger owns 9.84% and is the second-largest shareholder of Doutor). The firm questioned the expected synergies of the marriage, arguing that Doutor has significant growth potential as an independent company, and criticized the share exchange ratio, which will gave shareholders of both companies an equal stake in the combined entity, in spite of Doutor’s much larger size.

“Harbinger believes that other Doutor shareholders are also concerned about the proposed business combination with NRS and the valuation of Doutor set by the exchange ratios,” the firm said in a statement.

Doutor shot back with its own statement, claiming “the decision to merge with Nippon Restaurant was made in light of the severe operating environment. The market is shrinking, competition is fierce and consumer tastes are diversifying.”


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