Warren Lichtenstein, a well-known US financier, is considering a comeback to the Japanese investment landscape after being absent for over a decade. His previous attempts at hostile takeovers in Japan had a significant impact on Tokyo's stock market. However, the current climate in Japan, characterized by a shift towards shareholder activism and a more receptive corporate environment, may provide a more favorable backdrop for Lichtenstein's investment ambitions.
Lichtenstein has been evaluating the Japanese market for over a year and has made multiple visits to Tokyo to assess potential opportunities. This renewed interest coincides with a broader wave of shareholder activism in Japan, where funds like ValueAct and Elliott Management have started challenging some of the country's largest corporations. The corporate governance framework in Japan has undergone significant transformation since the introduction of the first corporate governance code in 2015, which has increased the accountability of companies to their shareholders and created an environment where activist investors can thrive.
Recent changes to takeover guidelines in 2023 have further streamlined the process for launching unsolicited bids, making it easier for investors to engage with Japanese firms. Currently, around 16% of companies listed in the Prime section of the Tokyo Stock Exchange have boards with a majority of independent directors. This shift increases the likelihood that these companies will seriously consider takeover proposals, even if they are unsolicited. These changes suggest that Lichtenstein may find a more conducive environment for his investment strategies, which have historically focused on unlocking value in undervalued companies.
Lichtenstein's previous attempts at hostile takeovers in Japan faced significant backlash from the local business community, leading many companies to adopt defensive measures. However, the current climate indicates a shift in attitudes, with many companies now more open to engaging with activist investors and considering their proposals. The recent activities of Canadian retailer Couche-Tard, which is pursuing an unsolicited takeover of Seven & i, exemplify the changing dynamics in Japan's corporate sector.
As Lichtenstein weighs his options, he is likely considering the lessons learned from his past experiences in Japan. The current environment presents a unique opportunity for investors who can identify undervalued companies with hidden assets, a strategy that Lichtenstein's firm, Steel Partners, has historically employed. Lichtenstein's recent visit to Tokyo, accompanied by baseball legend Bobby Valentine, suggests a keen interest in the potential for growth in the region, both in sports and investment.
The evolution of Japan's corporate governance and the rise of shareholder activism signal a new era for investors like Lichtenstein. The increasing acceptance of unsolicited bids and the growing number of independent directors on corporate boards suggest that the barriers to entry for activist investors are diminishing. This shift could lead to a more dynamic investment landscape in Japan, where traditional corporate structures are challenged, and shareholder interests are prioritized. The potential for successful engagements with Japanese firms could not only benefit Lichtenstein and his investment group but also contribute to the ongoing transformation of Japan's corporate landscape.