Oasis Management Co.â€™s Seth Fischer increased his pressure on Panasonic Corp. to sweeten its offer for listed subsidiary PanaHome Corp., calling the transaction a test case of whether Japanâ€™s corporate governance overhaul is working.
Oasis will ask the courts to rule on whether the price is fair if shareholders approve the deal on current terms, Fischer said in an interview in Tokyo last week. The Hong Kong-based fund, PanaHomeâ€™s second-largest shareholder after Panasonic, says the offer undervalues the home builder by more than 50 percent. Fischerâ€™s calling for a bigger share-exchange ratio or for PanaHome to pay out its cash as a special dividend.
â€œTheyâ€™re basically taking our holdings at a cheap price,â€ said Fischer, Oasisâ€™s chief investment officer. â€œItâ€™s just not right.â€ Oasis will petition for appraisal of whether the price is fair if Panasonic gets the two-thirds of votes it needs to make PanaHome a fully owned subsidiary, Fischer said. He expects the share-swap proposal, which was announced in December and faces a vote in June, to be approved because Panasonic owns 54 percent of PanaHome.
Fischer says heâ€™s setting his sights on most minority shareholders rejecting the deal, which would bolster any case in the courts. â€œIf you have a majority of the minority, then they wonâ€™t have a defense that this is a fair price,â€ Fischer said.
Panasonic, meanwhile, says the terms donâ€™t disadvantage any PanaHome stock owners. â€œThe deal is fair to PanaHomeâ€™s shareholders in terms of both contents and process,â€ Kyoko Ishii, a spokeswoman for Panasonic, said by phone.
PanaHome says it took steps to avoid any conflict of interest between the controlling and minority shareholders, including seeking guidance from legal advisers, getting a third-party valuation and setting up an independent committee.
â€œWe think the share exchange is appropriate for all shareholders, including minority shareholders,â€ Katsuhiko Izutsu, a spokesman for PanaHome, said in an e-mailed statement. â€œPanaHome plans to make additional disclosure and seek the understanding of all shareholders.â€
Under Japanese rules for buying all shares of a listed subsidiary through a share exchange, minority shareholders have the right to ask the courts for an adjudication on whether the exchange ratio is fair.
Fischerâ€™s Oasis started a website last week to lobby other investors with what it sees as the problems with the takeover. They begin, according to Fischer, with PanaHomeâ€™s 97.5 billion yen ($862 million) in cash and deposits, including 74 billion yen that sits at Panasonic.
PanaHome should have invested this money to grow its business or returned it to all shareholders, rather than just benefiting the parent company, according to Fischer. Not doing so depressed PanaHomeâ€™s share price, making it cheaper for Panasonic to buy, and goes against the tenets of the corporate governance code Japan introduced in June 2015, he says.
â€œPanaHome has cash, runs a housing business and has real estate holdings,â€ says Masahiro Mochizuki, an analyst at Credit Suisse AG in Tokyo. â€œIn valuing companies like this, thereâ€™s a problem with ignoring the value of assets on the balance sheet when deciding the share exchange ratio,â€ he said. In transactions between listed parents and subsidiaries, â€œyou have to care most about transparency and fairness,â€ he said.