U.S. activist investor Elliott Management has just unveiled it is now one of Tokyo Gas’s top shareholders and looks to push Japan’s energy utility giant to sell its real estate portfolio, the Financial Times reported on Tuesday, citing sources with knowledge of the plans.
Tokyo Gas’s real estate portfolio is estimated to be worth about $9 billion, according to Elliott Management. In a stock exchange filing on Tuesday, the activist fund disclosed it now owns 5% of Tokyo Gas, and is now one of the three biggest shareholders in the utility.
As of March 31, the top two shareholders in Toyo Gas were The Master Trust Bank of Japan Ltd. with nearly 16% and Nippon Life Insurance Company with a 7.8% stake.
Elliott’s acquisition of 5% in Tokyo Gas comes as Japanese companies of all sectors are under increased shareholder pressure to justify their returns or divest non-core businesses. Investors want better capital efficiency and higher returns.
Japan’s listed companies, many of which operate in the energy sector, have earned the equivalent of $57 billion from divestitures over the last three years as they look to boost their capital efficiency and stock valuations.
Many of Japan’s largest listed firms are conglomerates that include diverse businesses. But their market value is below the value of the separate businesses, the so-called conglomerate discount, as Nikkei Asia reports.
The drive to boost market value and return on investment has led to a shift in strategies among Japanese firms in recent years.
In addition, the Tokyo Stock Exchange has introduced new regulations aiming to improve capital efficiency, shareholder value, overseas investment, and accountability for management.
As a result of these regulatory changes and a shift in the corporate mindset, Japanese conglomerates have been selling off subsidiaries, affiliates, and stakes in projects to divest from less profitable and non-strategic assets.
By Tsvetana Paraskova for Oilprice.com
