The “struggle outcome” of radical investment institutions’ restructuring of large companies will largely depend on shareholder equity data and “board politics.” The SoftBank Group and Sony’s shareholder base are made up of a high proportion of foreigners, and almost all of them tend to degroup.
Editor’s note: This article comes from Tencent Technology , review Cheng Xi.
At the same time, large-scale Japanese companies, such as the SoftBank Group, are also experiencing various business problems. According to a Japanese media report analysis, in the face of the entry of radical investment institutions, some large Japanese companies have arrived at the moment of spin-off.
According to foreign media reports, recently, investors from Japan’s SoftBank Group have finally seen a ray of sunshine in the dark clouds that have enveloped the group for months.
While SoftBank Group Group ’s worst performance in history was announced on Wednesday, and its managed Vision Fund No. 1 has had disastrous results in investments in start-up technology companies such as WeWork, Softbank Group ’s stock price has It soared from 4,500 yen ($ 41) per share to 5,700 yen.
Elliott Management, a US-based radical investment agency, announced that it has acquired a 3% stake in SoftBank Group in the past period, and the company implicitly requested the spin-off of SoftBank Group. The news made investors happy. Inspiring.
This makes Eliot the third well-known foreign radical investment agency calling for the breakup of large Japanese corporate groups.
Third Point in the United States previously asked Japanese established consumer electronics company Sony to abandon its image sensor business and focus on movies, games and music.
In addition, Franchise said that Japan’s Kirin Holdings should abandon the pharmaceutical and skin care businesses that are not related to beer.
Similar to SoftBank GroupThe reason is that with the entry of these fund investment institutions, the stock prices of Sony Corporation and Kirin Holdings have soared.
It is clear that the market believes that all these companies are more valuable than being split up. With large corporate groups outside Japan on the verge of extinction, it will be interesting to see how the management of SoftBank Group, Sony Corporation and Kirin Holdings responded. Can they vigorously prove that large-scale enterprise groups’ “holding together” is actually beneficial to shareholders?
The CEO of Softbank Group, Zhengyi Sun, owns 22% of Softbank Group. For many years, he has vigorously declared that the total market value of Softbank Group is only half of the sum of the market value of its various assets. It is the fault of the capital market, but this statement of SoftBank Group has not been accepted by the outside world.
However, corporate group discounts—the capital market almost automatically “depreciates” 10% to 30% of large companies made up of unrelated businesses and assets—has always existed for obvious reasons.
In a sense, the purchase of SoftBank Group requires the purchase of a fixed list of listed companies-Chinese e-commerce giant Alibaba, the fourth-ranked mobile operator in the United States, Sprint (T-Mobile, which is about to be ranked third) (Acquisition), Japanese Internet portal “Yahoo Japan”, but in fact some investors are willing to do so, while other investors do not recognize these companies. Forcing investors to buy lengthy “subsidiary packages”, including businesses that they may not like, will inevitably lead to discounts on the valuation of large corporate markets.
Next is the debate on synergy. In the 1980s, Sony bought Columbia Pictures and CBS record labels to create content that could be played on its own Betamax videocassettes and walkman devices. According to the same wrong logic, a bowl manufacturing company should buy a soup food company.
Thirty years later, the “third point” of the radical investment agency puts forward the now self-evident view that Sony ’s content entertainment business and equipment hardware business are so different that they are separated from each other, and their respective days will be more it is good.
Recently, Kirin Holdings, one of Japan’s largest beer companies, invested 260 billion yen to acquire pharmaceutical company Kyowa Kirin (Kirin Holdings has previously held half of the company’s equity), and Kirin Holdings also acquired cosmetics manufacturers Fancl. In theory, the fermentation technology of Kirin Holdings Beer could be shared with these acquired companies to produce nutritional supplements and emulsions.
Even if Kirin has something valuable to teach Fancl, the question is still why it used 130 billion yen of shareholder capital instead of creating a pure technology license or joint venture program.
In addition, through the acquisition of a large number of shares in a listed company, Kirin Holdings actually spawned another listed subsidiary, whichIt bears all conflicts of interest and corporate governance issues that are unique to Japanese companies.
Why do the management of these large Japanese companies object to the disposal and divestiture of non-core businesses, even if such a move is obviously in the best interests of their own shareholders?
In terms of Masayoshi Son, the answer seems clear: the breakup of SoftBank Group will defeat his ambition to create the world’s largest technology company. Paradoxically, however, Sun Zhengyi’s emphasis on scale itself, rather than return on capital, makes SoftBank Group’s market value discount even worse.
In the past few decades, Sun Zhengyi and SoftBank Group searched for technology companies with development potential in the world, and gave extremely generous valuations (far more than their last valuation). Hundreds of millions of dollars in investments were made to obtain one to 20% equity in technology companies. He will then intervene in the operation of these technology companies, require them to collaborate and share technology with each other, and promote each other’s position in their respective markets, thereby becoming a huge passenger aircraft business empire, and Sun Zhengyi hopes to become the rule of this “empire” By.
Kirin’s management made a similar size-based argument: Domestic beer consumption in Japan is shrinking, so something must be found to maintain maximum income. However, investors care about profits, not sales revenue.
Another possible management motive is that the structure of large groups has reduced the company ’s appeal as an external company ’s acquisition and merger target, and some managements have even introduced the “poison pill plan” to prevent outside company mergers and acquisitions. Many Japanese listed companies Buying or increasing the shares of other listed companies, while the subsidiary’s business is facing more criticism at this time, which has given birth to a strange phenomenon of the “horse carriage” cycle of Japanese companies.
The “struggle outcome” of radical investment institutions’ restructuring of large companies will largely depend on shareholder equity data and “board politics.” The shareholder bases of SoftBank Group, Sony Corporation and Kirin Holdings are all composed of a high proportion of foreigners, and almost all of them tend to degroup. Sun Zhengyi is faced with a survival option-sticking to his dream of a technology business empire or staying awake.
How the management of SoftBank Group, Sony Corporation, and Kirin Holdings responded to external calls for de-grouping will reveal the thinking and soul of Japanese companies themselves. Although management may try, it will be difficult for them to objectively prove that the status quo of the corporate group is beneficial to shareholders.
SoftBank response
SoftBank Group has been entering the board of directors of technology companies through large investments and intervening in business development, planning asset divestitures or mergers and acquisitions of investee companies. SoftBank Group itself has become the target of radical investment institutions, which was very rare in the past.
With regard to the shareholding behavior of Elliott Fund, Takeniya Miyauchi, CEO of SoftBank Group’s subsidiary “SoftBank” (Japanese mobile operator), stated that the radical investor’s assessment of SoftBank Group’s stock is ” positive”.
According to the source, Elliott Fund hopes to promote some reforms of SoftBank Group, thereby increasing the stock price, including strengthening internal governance, and adding some stock repurchase programs to timely return to shareholders.
In the past six months, SoftBank Group has fallen into great controversy and dilemma. SoftBank’s WeWork, the second landlord of the United States office building, failed to go public, and its valuation plummeted by 90%. This has become a landmark event in the history of the global technology industry.
In order to avoid about $ 10 billion in investment, SoftBank Group announced the implementation of a bailout for WeWork, which will provide about $ 10 billion to acquire more equity and provide working capital. However, due to the WeWork listing disaster, the financing negotiations between Japanese commercial banks and SoftBank Group have stalled.
Because the trust of the outside world has plummeted, the Vision Fund No. 2 (also up to $ 100 billion) prepared by SoftBank Group also encountered major setbacks. Few external companies or sovereign wealth funds are willing to invest in Vision Fund No. So far, this fund has raised less than half of its target, and almost all of its funds come from SoftBank Group’s own cash.
Sony responds
Sony’s business lines are complex. It is well known that in the past more than a decade, Sony has fallen into a serious dilemma, and later completed a major reorganization under the leadership of Kazuo Hirai and returned to the track of profitability.
During Sony’s restructuring and reform, there have been many debates about its divestiture. For example, the outside world believes that the global smartphone market has been saturated and declining. Sony’s mobile phone business has suffered a long-term loss and should be completely withdrawn from this market. However, this idea was rejected by Sony management.
At the end of January, the third point fund once again called on Sony to continue to divest non-core assets. The fund said that, in response to external calls, Sony had simply withdrawn from camera maker Olympus, which was not enough.
Daniel Loeb, the head of the third point fund, praised Sony’s strong returns last year, but said it needed to carefully review its portfolio and divest unimportant businesses.
The third point fund said that they still believe that Sony’s film and television media business and semiconductor business can exist independently and create more value than being bundled together.
Currently, many of Sony’s sub-businesses are not synergistic. Sony is one of the three major game giants in the world, launching PS consoles and game software. In addition, Sony has a strong music, movie and TV media business in the United States. In the field of semiconductors, Sony is currently the world’s largest manufacturer of camera sensors, with more than half of the share, which is also Sony’s most competitive business.
With regard to the third point fund requirement, Sony said last year that it would evaluate the business, but so far has not proposed a major reorganization or divestiture plan. SonyThe company refused to divest its camera sensor business, and the company also rejected another proposal from the third point, which was to sell its equity in some financial industry companies in Japan.