Dalton Investments endorses proposal outlined in the document Outstanding Corporate Value Enhancement Opportunities for Toyo Suisan Kaisha

Dalton Investments Group is an institutional investor holding shares of Toyo Suisan Kaisha, Ltd. As a shareholder, we are pleased to endorse the proposal outlined in the document Outstanding Corporate Value Enhancement Opportunities for Toyo Suisan Kaisha, released by Nihon Global Growth Partners (NHGGP) on February 19, 2025.

The proposal calls for the following actions:

  • The establishment of a Strategic Review Committee to assess the business portfolio;
  • A review of the reference values for the cost of capital;
  • Optimization of the capital structure through a 200 billion yen special share buyback;
  • The formulation of a new shareholder return policy.

As a shareholder, we have engaged in dialogue with Toyo Suisan Kaisha, Ltd. (the Company) and requested a robust response to TSE’s requests, including the recognition and allocation of an appropriate cost of capital. However, two years after the TSE’s request, the Company has yet to take effective action.

We believe that the previously suggested cost of capital of 4–8% is unacceptable for many investors, and that allocating capital based on such a lenient perception is likely to damage corporate value. For example, although the Company’s instant noodle business is highly competitive, growth-oriented, and delivers a strong return on capital, most cash flows generated by this core business have been retained (increased cash and deposits) and allocated to low-margin businesses such as those in the seafood and processed foods segments, thereby missing opportunities to enhance shareholder value.

Based on these concerns, we have been urging the Company to take the following actions:

  1. Ensure appropriate identification and disclosure of the cost of capital;
  2. Determine and disclose the required equity and cash levels;
  3. Formulate and disclose business portfolio policies that take into account cost of capital and return on capital considerations.

These proposals are consistent with our understanding of the issues and our dialogue with NHGGP, and we therefore express our support for NHGGP’s assertions.