Portfolio Update

RNS Number : 0459B

Nippon Active Value Fund PLC

08 February 2022

 

Update on portfolio holding

Nippon Active Value Fund notes Rising Sun Management offer for Intage Holdings

London / Tokyo, 8th February 2022:   Nippon Active Value Fund plc (NAVF) notes the following announcement being made by Rising Sun Management ("RSM"):

RSM has offered to buy 100% of Japanese marketing research firm Intage Holdings (Bloomberg Ticker: "4326 JP Equity") for Yen 1900 per share through its Japanese vehicle Hikari Acquisition KK. The offer values Intage at approximately Yen 76.7bln.

Paul ffolkes Davis, Chairman of RSM, made the offer in a letter delivered on 7 February 2022 to Mr Noriaki Ishizuka, President and Representative Director, Intage Holdings. " We expect you to now convene an 'independent committee' as described by Japanese M&A guidance rules to evaluate our offer," Mr ffolkes Davis said in the letter. The offer is subject to financing and approval by the Board of Intage Holdings.

On the 27^th January 2022 RSM sent a letter to Intage Holdings urging that it undertake immediate preparations to organise a management buyout. This followed a filing on the 18^th January 2022 which showed (NAVF), an activist, Japan-focused Investment Trust, in combination with Earl 1927 LLC and Michael 1925 LLC (together the "Investor Group") held 4.1 million common shares in Intage, making the Investor Group the company's biggest shareholder with a 10.17% stake. RSM is investment adviser to the Investor Group.

Mr ffolkes Davis added: "We remain convinced that the immediate future of Intage Holdings should be as a private company, able to pursue its various initiatives away from the glare of the public market. As we have always said, we are keen to achieve this outcome in the spirit of friendly co-operation. We still hold this aspiration, and we hope you will too."

In the past, RSM has highlighted several areas of concern with how Intage is managed. They include:

· Lack of widely held stock incentives for management and employees

· An unsuitably expansionist acquisition policy lacking sufficient financial returns

· Slow progress in digitising operations and low levels of automation in the business generally

The Investor Group acts as an activist investor drawing on the RSM team's significant Japanese market knowledge and their two decades of successful engagement to generate uncorrelated returns. Many Japanese companies are under-researched, show rising balance sheet cash reserves and have questionable capital allocation policies. RSM seeks to engage with investee company management teams to promote value-enhancing corporate reorganisation and capital allocation strategies that can result in significantly improved returns for all stakeholders, including management, employees and shareholders.

In 2021, RSM led a campaign to pressure the management of Sakai Ovex to conduct an MBO, arguing that the firm was significantly undervalued by the market. RSM first proposed an MBO at ¥2350, and a transaction was eventually consummated at a price of ¥3810, following the involvement of other like-minded investors, resulting in a significant gain for investors advised by RSM.

-ENDS-

NOTES TO EDITORS

About NAVF

Nippon Active Value Fund ("NAVF") is an Investment Trust listed on the Specialist Fund Segment of the London Stock Exchange. The investment advisor of the Fund is Rising Sun Management Limited. NAVF is targeting attractive levels of capital growth for shareholders from the active management of a focused portfolio of quoted small cap Japanese equity investments. The investment advisor, Rising Sun Management Limited, targets companies which are attractive, undervalued and have a substantial proportion of their market capitalisation held in cash and/or listed securities and/or realisable assets.

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