Activism in Asia
According to Activist Insight, activist hedge funds intervened in the management of approximately 300 companies worldwide by purchasing treasury stocks or demanding more dividends or spinoffs in the first half of this year. The number increased by 23 percent from a year ago, and is expected to reach 500 at the end of this year, while it had remained at 106 five years ago.
Activist hedge funds are targeting Asian companies in particular. In the first half of this year, they attacked only 10 companies in Asia, while attacking no less than 216 companies in the United States. However, the rate of increase is alarming. They attacked only one company in Asia in 2010, but the number skyrocketed to six in 2012, 10 in 2013, and 14 last year.
More Asian enterprises are surrendering to them, too. For example, Fanuc, a Japanese industrial robot manufacturer, announced in April that it would double its dividend payments under the pressure of Third Point. Third Point bought 7 percent of Sony shares two years ago, demanded a spinoff of the entertainment division, and disposed of the shares after being refused.
Nintendo signed a partnership contract with Universal Parks & Resorts in March this year to set foot in the mobile game market. This was a result of the pressure that Hong Kong-based hedge fund Oasis Management put on it for as long as two years. Oasis Management is currently involved in the management of Kyocera, Canon, and others.
Elliott Management is in a court battle with the Bank of East Asia (BEA), the third-largest commercial bank in Hong Kong. In March this year, the BEA issued new shares and sold them to the Mitsui Sumitomo Financial Group, one of its friendly shareholders. In response, Elliott Management claimed that the value of the shares of existing shareholders was diluted in the interest of the owners’ rights.
The Financial Times recently reported that family-run conglomerates in Asia characterized by the lack of transparency in management and governance are attractive targets for hedge funds. Elliott Management tried but failed to increase the price while Singaporean bank OCBC was acquiring Hong Kong-based Wing Hang Bank last year.
Problems regarding activist hedge funds are quite complicated in that even foreign pension funds and sovereign wealth funds highly interested in management transparency and corporate governance structure improvement are investing much in them. Last year, Elliott Management presented a rate of return of 8.24 percent, more than double the average hedge fund yield, to U.S. pension fund customers. Foreign institutional investors, such as the Canada Pension Fund Investment Board and California Pension Fund, sided with Elliott Management during the recent voting on a merger between Samsung C&T and Cheil Industries.