It is one thing for Warren Lichtenstein to vent his frustration at corporate Japan’s unique style of self defence.
The chief executive of Steel Partners, the activist fund that has been targeting a motley assortment of companies ranging from a saw manufacturer to a sauce maker, Tuesday attacked the favoured defence of Japanese companies – the so-called advance warning system. He called it “the worst form of anti-takeover defence” which “would be illegal in any other country in the world”.
Mr Lichtenstein’s fund is being thwarted in its attempts to wrest value from the companies it invests in by poison pills and delaying tactics, including the AWS, a tactic used to delay the start of tender offers.
But it is a completely different matter when the likes of Tomonori Yano, executive managing director of the massive Pension Fund Association, and Takeshi Niinami, chief executive of Lawson, the convenience store group, come down hard on corporate governance in Japan and appeal to activist investors, such as Steel Partners, to shake up corporations.
Speaking at a UBS conference in Tokyo, Mr Yano lamented the lack of action by home-grown institutional investors and conceded that in order to change Japan needs external pressure, or “black ships”, referring to the US ships that opened up feudal Japan in the 19th century.
“The giant [Japanese] institutions are not speaking up. The only [investors] who say anything in Japan are foreign funds,” he said.
Mr Niinami was equally appreciative of activist funds. “There is no pressure from the market [on Japanese companies] to raise return on equity. So, it would be beneficial for activists to do that. I think it is a very good thing, that activists are ringing the alarm bells,” he said.
For the chief of Steel Partners, which has been castigated widely in Japan for its seemingly aggressive style, they must have been sweet words indeed. Whether or not such comments represent the turning of the tide, Mr Lichtenstein is likely to go home feeling better than when he left.
Britain’s motor worries
Ford Motor’s plans for the sale of Jaguar and Land Rover are barely off the drawing board and already problems are building, down the production line.
Partly that is because the US group’s intentions were outed prematurely. Discussion of the sale of its two British luxury marques is at a very early stage, yet the mere possibility has already triggered union warnings about the buy-out bogeyman: if “asset-stripping” private equity firms are on the list of buyers, union leaders say, the government must step in to “protect” the companies.
Corporate change in the UK automotive sector is almost always a trigger for union agitation – and government embarrassment. Just before the 2005 election, ministers offered a £110m bridging loan to try to sweeten a Chinese rescue deal for MG Rover, and then, when the company collapsed, lent it £6.5m anyway. In 2004, Tony Blair, the prime minister, and Gordon Brown, chancellor of the exchequer, stepped into a dispute between Ford and the unions over plans to stop car production at Jaguar’s plant in the British Midlands, to little avail: car production at the historic factory ended last year.
The sale of Jaguar and Land Rover has equal potential to make a fool of government, particularly as it comes as Mr Blair is handing the premiership to Mr Brown and as parliamentary hearings into the buy-out industry get under way. Preventing a firestorm will require all sides to show they have learnt hard lessons.
First, government must resist the temptation to influence the sale. Jaguar and Land Rover are not in public ownership – and, even assuming this should be a consideration, they are not on the brink of collapse. The deal, if it happens, will be a commonplace transfer of assets from one private-sector entity to another.
Second, private equity bidders – if they are not trumped by Asian manufacturers in search of trophies – need to start work now on plans to assuage concerns at community and national level about the consequences of any leveraged buy-out. They may be helped by the growing realisation that private equity, vilified by the unions and rejected by government as a suitable buyer for MG Rover in 2000, would have been a better owner than the consortium that bought it and ran it into the ground.
Finally, British people need to learn to concentrate on outcomes rather than ownership. They are already halfway there: the UK has got used to the idea of foreign companies owning “its” carmakers (and in the process has reaped the benefits of hosting some of the world’s most efficient automotive manufacturing plants). Ford’s sale of Jaguar and Land Rover should kick-start a wider public accommodation with the idea of private equity owners.