SANTA MONICA, Calif. & TOKYO, Japan – Dalton Investments issued the following letter to the directors of Fujitec Co. (6406.T) regarding the company’s capital allocation policy.
The Board of Directors
Fujitec Co., Ltd.
Big Wing, 591-1 Miyata-Cho, Hikone
Shiga 522-8588 Japan
February 2, 2022
Dear Board Members:
Thank you very much for your continued efforts to enhance the value of Fujitec. As a long-term shareholder of Fujitec since 2004, Dalton Investments (“we”) believes that the company has an attractive business, trading at a significant discount to its intrinsic value. We, on behalf of our clients, currently own 2.5% of your company.
We congratulate you on making certain progress in your company’s corporate governance in recent years. Meanwhile, we are writing this letter to express our concern about your company’s new capital policy announced in December 2021, as part of the New Mid-Term Management Plan (the “Management Plan”).
We believe that the budgets allocated to capex and M&A in the Management Plan are excessive. We typically applaud when management reinvests excess cash in the business to achieve long-term growth. Allocating such a significant amount of capital to capex and M&A, without any clear discipline or explanation, however, simply appears to be nothing but an excuse for ignoring our requests to enhance shareholder returns.
All concerns expressed in the open letter (including the concerns raised by us above) recently published by one of your shareholders, Kempen Capital Management N.V., appear reasonable to us. We, therefore, request that management address those concerns in a timely fashion.
Sincerely yours,
James B. Rosenwald III
Co-Founder and Chief Investment Officer
Dalton Investments
Please note that the below is a Japanese translation of the above letter that Dalton Investments sent in English, provided as a courtesy. In the event of any inconsistency between the English language version and the Japanese language version, the meaning of the English language version shall prevail.
IMPORTANT INFORMATION
This letter has been prepared by Dalton Investments and its affiliates (collectively, “Dalton”) for the benefit and use of the original recipients. It does not constitute, and should not be construed as, an offer or solicitation to enter into any transaction regarding any financial instrument, nor should it form the basis of or be relied on in connection with any such transaction. This letter does not constitute, and should not be construed as, tax, legal, regulatory, accountancy or other specialist or technical advice, or investment advice or personal recommendations, any trading strategy or advice (from an investment perspective) to any person on the suitability of any transaction.
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