Japan: Kirin Holdings opposes proposal to divest assets outside of beer business

Japan’s Kirin Holdings Co Ltd opposed on Febuary 19 a proposal by an activist shareholder that it divest assets outside its beer business, saying investments in areas such as healthcare were crucial to its business, Reuters reported.

UK-based Independent Franchise Partners (IFP), which owns a 2% stake in Kirin, has called on the company to focus on beer, sell non-core businesses and use proceeds from sales to buy treasury stocks worth 600 billion yen ($5.45 billion).

“The board is strongly opposed to Franchise Partner’s proposal that all non-beer assets be sold,” the company said in a statement.

IFP’s chief executive Hassan Elmasry told reporters in Tokyo on a conference call the company will convince other shareholders to support its proposal for divesting assets outside Kirin’s beer business.

“We regret that Kirin management have not accepted our compromised offer in the constructive spirit in which it was given,” Elmasry said.

“Instead, we aim to convince other shareholders on the merit of the proposal at the annual general meeting (AGM),” he said. Kirin is set to hold its AGM in March.

Given that beer consumption in Japan has more than halved since the 1990s, Kirin has diversified its revenue sources by moving into the pharmaceutical business with affiliate Kyowa Kirin Co Ltd and picking up a 30.3% stake in cosmetics company Fancl Corp.

While the domestic beer market is shrinking, IFP said Kirin’s beer business is still “highly attractive” regarding its market share and profitability.

Activist investors have been gaining momentum in Japan and have complained about what they see as poor performance as well as returns from cash-hoarding firms, with Prime Minister Shinzo Abe advocating strengthening corporate governance.

But companies are often able to ignore minority investors given the longstanding practice of cross-shareholding, where firms hold stakes in each other to cement business ties.

17 February, 2020