Activist Fund Targets Daidoh CEO, Proposes New Board Members

Activist Fund Strategic Capital Seeks Daidoh CEO Removal, Proposes New Board Members Amid Governance Push

By Alex P. Chase

4/17, 02:40 EDT

Key Takeaway

  • Strategic Capital Inc. aims to remove Daidoh Ltd.'s CEO, leveraging its position as the largest shareholder amid growing shareholder activism in Japan.
  • Despite a 32% stock increase under CEO Tsukasa Nabewari, the activist fund proposes six new board candidates for June 27 AGM.
  • This move highlights a shift towards improved corporate governance and performance in Japan's equity market.

Activist Fund Targets Daidoh Leadership

Strategic Capital Inc., led by Tsuyoshi Maruki, has announced its intention to seek the removal of Daidoh Ltd.’s president, Tsukasa Nabewari, citing years of operating losses at the clothing manufacturer. As Daidoh’s largest shareholder, Strategic Capital is leveraging its position to influence the company's direction, reflecting a growing trend of activist investors in Japan. This move is part of a broader effort by Japanese policymakers to enhance the attractiveness of the nation’s equity market through improved corporate governance and valuations. The fund's proposal is set to be presented at Daidoh’s annual general meeting on June 27.

Shareholder Activism on the Rise

The landscape of shareholder activism in Japan is becoming increasingly prominent, with a record number of shareholder proposals expected in the upcoming annual meeting season. This trend underscores a shift in the dynamics between corporate management and shareholders, where the latter are more actively seeking to influence company policies and leadership decisions. Strategic Capital’s move against Daidoh’s president is emblematic of this broader shift, as activist investors push for changes they believe will enhance corporate performance and shareholder value.

Daidoh’s Performance and Management Response

Under the leadership of President Tsukasa Nabewari, who took office in April 2020, Daidoh’s shares have seen a 32% increase, as per Bloomberg data. This performance, particularly the stock price appreciation following Strategic Capital’s stake-building, highlights the complex interplay between management actions and investor expectations. Despite the activist pressure, Daidoh plans to ask its shareholders to reappoint the current management at the upcoming annual general meeting, setting the stage for a potentially contentious vote.

Strategic Capital’s Board Proposals

In addition to seeking the ouster of President Nabewari, Strategic Capital has proposed six candidates to join Daidoh’s board. This move suggests a strategic effort to reshape the company’s governance structure in a way that aligns with the fund’s vision for Daidoh’s future. The introduction of new board members could potentially lead to significant changes in the company’s strategic direction, operational focus, and overall governance practices, reflecting the increasing influence of activist shareholders in shaping corporate policies.