CHICAGO
Curi RMB Capital opposes the management buyout (“the MBO”) of Taisho Pharmaceutical Holdings Co., Ltd. (4581 JP, TSE Standard, “Taisho”) because we believe the MBO is unfair and ignores the interests of minority shareholders. Curi RMB Capital plans to vote against the buyout and related resolutions at the extraordinary general meeting of shareholders that will be held by Taisho next month.
Our issues with the MBO are the following:
(a) Lack of adherence to Fair M&A Guidelines in choosing the special committee members
The “Fair M&A Guidelines” released by the Ministry of Economy, Trade and Industry (METI) clearly state that the special committee “does not act from a neutral, third-party standpoint, but is rather expected to evaluate and decide on an M&A transaction…from a position which aims to promote the interests of both the target company and its general shareholders”. The Guidelines further state that “an outside director is the most suitable type of member” along with “outside company auditors…to complement the outside directors”, and further notes “a Special Committee consisting only of outside company auditors and outside experts may be considered the second-best solution”.
In the MBO, the special committee has no outside directors and consists only of two outside company auditors and an outside expert. Under this circumstance, it is clear that the special committee should have followed the Fair M&A Guidelines strictly to ensure the fairness of the transaction.
(b) The special committee did not appoint its own financial advisor.
The Guidelines recommend that the special committee hire its own financial advisor (FA) while in the process of MBOs to avoid potential conflicts of interest. In the MBO however, the special committee did not hire its own FA, but merely endorsed Daiwa Securities, the FA that was hired by the board of directors. As the qualification of the committee members is in question, the committee should have hired its own FA as the Guidelines specify to secure the fairness of the transaction.
(c) The MBO price is too low in light of the intrinsic value of Taisho.
Curi RMB Capital believes the tender offer price was set at an unfairly low price, which is not in the best interest of minority shareholders. Although the offered price of 8,620 yen per share was approximately 50% above the recent stock price of Taisho, it is discounted as much as 15% from Taisho’s book value per share. We suspect Taisho’s excess cash, including long-term securities, may not have been fully accounted for in the valuation process. Curi RMB Capital believes the intrinsic value of Taisho should be no less than 10,132 yen per share, which is Taisho’s book value per share as of September 30th, 2023.
Curi RMB Capital believes the MBO was not carried out fairly and plans to oppose the MBO and its related resolutions at the upcoming extraordinary general meeting of shareholders held by Taisho in March.
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About Curi RMB Capital
Curi RMB Capital is a national independent investment advisory firm that puts the client at the center of its mission to create accessible, tailored solutions to reach their long-term financial goals.
Formed in 2024 as the result of a merger between two experienced RIA firms aligned in culture and values, Curi RMB Capital brings in-house, institutional-quality investment expertise together with deep, holistic planning teams to deliver and implement customized strategies for each client. Curi RMB Capital serves individuals, physicians, family offices, and institutions. To learn more about Curi RMB Capital, visit https://rmbcapital.com/curi-rmb.
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CONTACT
Curi RMB Capital
japan@rmbcap.com
