Activists are pushing Japan Inc. to its “big turning point,” Suntory boss says
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The head of one of Japan’s largest business associations said the country had reached a “major turning point” in corporate change as a critical mass of shareholder activists forced companies to wake up from decades of slumber.
The comments by Takeshi Niinami, president of Japanese beverage company Suntory and chairman of the influential Japan Association of Corporate Executives, come at the end of a year in which a record number of foreign and domestic activist funds bought a record number of Tokyo-listed stocks.
Activist funds, such as Elliott Management and ValueAct have also become significantly bolder in their choice of targets – a list that now includes Japan’s largest real estate developer, Mitsui Fudosan, and automaker Nissan.
Under pressure from activist investors, the past year has also seen a sharp rise in the value of unsolicited takeover offers – a tactic once considered taboo but now backed by the government through a change in merger guidelines.
In an interview with the Financial Times, Niinami said about the increase activism and its impact on Japanese executives marked the end of the country’s long decades of stagnation, deflation and corporate inertia.
“The lost 30 years are over and we are facing a major turning point. This has to be positive,” said Niinami, who predicted that activism, private equity dealmaking and domestic consolidation would continue to increase in 2025.
“It is a turning point for Japan to become more effective, productive and profitable,” Niinami said, adding that Japanese management is now forced to pay greater attention to the metrics that matter most to investors, such as the cost of capital and return on equity.
The race is now on, Niinami said, for CEOs to transform their companies before an activist calls on them to do so. The unsolicited offer for Seven & i of Canada’s Alimentation Couche-Tard highlighted what was at stake, he said.
“This message is very important to get all CEOs to think about what is wrong with my company. If something is wrong, we have to fix it, otherwise we will face massive warnings from activists. Sleeping companies will now be awake,” Niinami said.
In addition to ACT’s unsolicited $38 billion bid for Japan’s largest convenience store operator, deals in 2024 included Nidec’s attempted $1.6 billion “non-consent takeover” of Makino Milling and a tug-of-war between the private equity giants KKR and Bain around the IT services group Fuji Soft.
Nicholas Smith, Japan strategist at CLSA Securities, said Japan was already the second largest private equity and activism market in the world. Japan accounts for two-thirds of Asian activist events, he said, and is even higher.
“Value investors and event traders around the world are closely watching Seven & I trading as a potential tipping point for Japan’s rapid evolution into a market for corporate control,” Smith said.
But the transformation of Japan’s stock market, investment bankers and other deal advisers warn, should be viewed as a fragile process. Jeremy White, an M&A partner at law firm Morrison Foerster in Tokyo, said the number of shareholder confrontations or unsolicited takeover offers could still decline in 2025.
“I think that would signal that there is enough tension in the market to stop the apparent trend. “I think what we have now is a speed that goes in a certain direction: it doesn’t have to be in reverse, it’s enough just to apply the brakes,” said White.
