Asia’s companies should be on high alert.
Activists, both homegrown and American, are coming after bloated balance sheets and family-controlled firms, and succeeding more often than hitherto in forcing through higher dividends and board changes.
Whether it’s because the Japanese and South Korean governments want their companies to respect minority investors’ interests, or because the activists themselves have adopted a less abrasive style, Asia is a hunting ground like never before. Last year, 31 percent of total involvement by activists outside the US was in the region, up from just 12 percent in 2011, according to a report by JPMorgan Chase.
Paul Singer’s Elliott Management is the best-known name. The US hedge fund battled for years -- so far unsuccessfully -- to force Hong Kong’s family-run Bank of East Asia to sell itself; famously tried to prevent a merger of two Samsung Group units three years ago; and now is pressuring Hyundai Motor to hand out more cash to shareholders and restructure.
Elliott has plenty of company, especially in Japan, where Prime Minister Shinzo Abe’s government is on a corporate governance kick. Daniel Loeb’s Third Point has launched campaigns against at least four Japanese firms in recent years, while Bloomberg News reported that Volta Global, the family office run by former managers of hedge fund Everest Capital, turned its sights on Asanuma, a construction concern.
Less high-profile but just as busy were domestic players, from Japan’s Sparx Group to Hong Kong-based Oasis Management and PAG Asia Capital. Add to them the short sellers like Muddy Waters Capital, which employ similar tactics of taking a stake and making public their views on management, and this starts to look like Asian companies under siege.
The trend is regionwide, with Hong Kong the most popular target of activists after Japan last year.
And the successes are starting to mount.
Last June, Reno, a vehicle of the activist investor Yoshiaki Murakami, elected its nominee to the board of Kuroda Electric over the objections of management, and later sold it to MBK Partners.
At Samsung, Elliott has turned failure into success: It couldn’t prevent that merger three years ago, but since then has had Treasury shares canceled and scored points for a diversity push by getting both a woman and a foreign director on the Samsung Electronics board. One could argue that Elliott’s high-profile campaign at Samsung eventually triggered the corruption scandal that brought down former South Korean President Park Geun-hye and led to the trial of the Samsung heir apparent, Lee Jae-yong.
Many Asian companies may believe they’re safe, especially because activists have toned down the abrasive approach of few years ago. They should remember that things can sour quickly, though. Elliott, for example, has resorted to litigation against Bank of East Asia and Samsung.
Bankers worried about the loss of China’s offshore buying binge may have another lucrative line of work defending besieged companies. And small shareholders across the region may have reason to cheer.
Nisha Gopalan
Nisha Gopalan is a Bloomberg Opinion columnist covering deals and banking. -- Ed.
(Bloomberg)
