Kirin considers buybacks, dividends as investor challenge looms
Facing a challenge from a vocal investor fund that wants to restructure its business, Japanese beer giant Kirin Holdings is dangling the prospect of share buybacks or dividends to win shareholders.
Chief Executive Officer Yoshinori Isozaki said that Kirin is considering more ways to reward shareholders, according to prepared remarks for a press briefing Tuesday during the company's investor day. Pushing back against criticism from activist investor Independent Franchise Partners (FP), with whom the company has been embroiled in conflict, he said that Kirin is not deviating from its main focus of beer.
Kirin has been in defense mode about its wellness and pharmaceutical business, which FP wants it to dispose of. The London-based fund has put in shareholder proposals for its annual meeting on March 27, which requests Kirin to undertake a 600 billion yen ($5.6 billion) buyback funded by a disposal of its health-related businesses. It's also demanding the company to add two independent directors and revamp its executive compensation.
Shares of Kirin, Japan's second-largest beermaker, have fallen 16% since FP's proposals were made public Feb. 14, compared to a 12% drop in the benchmark Topix Index.
Isozaki's remarks are the latest in a back-and-forth spat that started last month over FP's desire to see Kirin exit its health-care business, including its majority ownership of pharmaceutical company Kyowa Kirin Co., and its stake in beauty brand Fancl Corp. But the brewer says that its wellness segment is being set up take advantage of a market in Japan that could double to 4 trillion yen by 2024, according to its investor day presentation.
Kirin last month rejected a compromise from FP to withdraw its other requests if the company agreed to revamp its board with their suggested directors.
In an interview with Bloomberg on Feb. 27, Kirin's Chief Financial Officer Noriya Yokota described FP's suggestions as "drastic."
"If we just focus on beer, we won't be able to grow at the speed that we want," he said.
Vocal investor activity has blossomed in Japan in the past year, shaking up what was previously a staid corporate landscape. Last year, there was a tussle for control of Unizo Holdings Co., while Oasis Management Co. pushed Tokyo Dome Corp. to modernize its entertainment complex in the megalopolis.
While it's still unclear how successful these campaigns will be, a multi-year push by the government to overhaul corporate governance is making investors more confident that they can get companies to change.
