Activist Investor Urges Kao Corp. to Enhance Operations, Shares Surge 7.3%

Oasis Management urges Kao Corp. to revamp operations, potentially boosting stock by over 70%, igniting a 7.3% share jump.

By Alex P. Chase

4/3, 23:38 EDT

Key Takeaway

  • Oasis Management Co. urges Kao Corp. to enhance business operations, potentially increasing stock by over 70%.
  • Kao's shares surged up to 7.3% following Oasis's call for strategic changes in marketing and distribution.
  • The move reflects a broader trend of activist investor engagement in Japan, aiming to improve corporate governance and shareholder value.

Activist Investor Calls for Change

Oasis Management Co., an activist investor, has publicly urged Kao Corp., a Japanese cosmetics and household products manufacturer, to enhance its business operations. Oasis criticized Kao for its underperformance compared to competitors in several key areas, including sales growth, margins, return on equity, and stock performance. Despite owning a remarkable portfolio of brands, Oasis contends that Kao has not fully capitalized on these assets due to inadequate focus on marketing and distribution strategies. Oasis believes that with a more concentrated effort on its cosmetics and health and beauty segments, alongside improved marketing efforts, Kao's stock could potentially increase by over 70% from its recent levels.

Market Reaction and Potential for Change

Following Oasis's statement, Kao's shares experienced a significant uptick, jumping as much as 7.3% in Tokyo trading, marking the most substantial rise since November 9. This movement underscores the market's responsive optimism towards the possibility of Kao embracing strategic changes to enhance profitability and shareholder value. Analysts, including Naoki Fujiwara of Shinkin Asset Management Co., suggest that Oasis's push could accelerate Kao's efforts towards improving its financial performance, especially given the company's historical focus on profitability. However, challenges such as Kao's business performance in China have impacted its overall results.

Activism in Japan's Corporate Landscape

The call for change at Kao Corp. comes amid a broader trend of increased activist investor engagement in Japan. Government and institutional pressures for better corporate governance and valuation improvements have emboldened activists, leading to a record number of shareholder proposals. The landscape for activism is evolving, with investors targeting larger and more conservative companies, aiming to unlock shareholder value through various strategies, including advocating for increased dividends and strategic business realignments. Notable campaigns in the past year have targeted companies across different sectors, indicating a growing acceptance and impact of activist involvement in Japan's corporate governance.

Street Views

  • Naoki Fujiwara, Shinkin Asset Management Co. (Bullish on Kao Corp):

    "This will lead to an expectation that Kao will speed up in making changes... Kao has always been an excellent company, focusing on profitability."