Investors are pushing Japan Inc to its ‘tipping point’, says Suntory chief

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The head of one of Japan’s largest business leaders’ associations says the country has reached a “major stage” of business reform as a growing number of shareholder activists force companies to wake up from decades of slumber. age.

The comments by Takeshi Niinami, president of Japanese drinks group Suntory and chairman of the powerful Japan Association of Business Directors, come at the end of a year in which a record amount of foreign and domestic activist funding has which bought a record number of Tokyo-listed stocks. .

Activist money, like The Elliott System and ValueAct, have also been very bold in their choice of targets – a list that currently includes Japan’s largest furniture maker, Mitsui Fudosan, and carmaker Nissan.

Under pressure from rival investors, last year it also introduced a sharp increase in the value of unwanted foreclosures – a tactic once considered taboo, but now allowed by the government with a change in mixing guidelines.

In an interview with the Financial Times, Niinami said that activity is increasing pretending and its impact on Japan’s top executives, marked the end of the country’s decades-long recession, bankruptcy and corporate inefficiency.

“The lost 30 years are over, and we are facing a very good point. That should be good,” said Niinami, who predicted that the process, dealing with private equity and the integration of households will continue to rise in 2025.

Niinami, who added that the Japanese system will have to pay more attention to the values ​​that investors care about, such as the cost of capital. and restore balance.

The race was already on, Niinami said, for top executives to restructure their companies before an activist told them to do so. The unsolicited request for Seven & i Canada’s Alimentation Couche-Tard highlighted the problems, he said.

“This message is very important to drive all the CEOs to think about what is wrong with my company? If there is something wrong, we have to fix it, otherwise we will have a big warning from the activists .Sleeping companies will now be awake,” said Niinami.

In addition to ACT’s $38bn unsolicited bid for Japan’s largest wholesaler, the 2024 bids included Nidec’s $1.6bn “unauthorized takeover” of Makino Milling and a battle between private equity giants KKR and Bain over the IT services group. Fuji Soft.

Nicholas Smith, Japan strategist at CLSA Securities, said Japan it was already the world’s second largest market for private equity and for operations. He said that Japan was responsible for two-thirds of Asian activist events, and was making more progress.

“Globally, key investors and event brokers are actively looking at Seven&i’s business as a potential location for Japan’s rapid growth in the corporate governance market,” said Smith.

But the shift in Japan’s stock market, warn investment bankers and other contract advisers, should be viewed as a weak performance. Jeremy White, an M&A partner at Morrison Foerster law firm in Tokyo, said the number of shareholder disputes or unsolicited bid stories could still drop by 2025.

“I think that will show that there is enough friction in the market to stop what looks like a road trip. I think what we have now is a rush in one direction: that is not don’t need to back up, just putting on the brakes will be bad enough,” said White.