Oasis Announces Campaign to Improve Ain Corporate Governance (Stock Code: 9627 JT)
2024年6月28日 - 8:30AM
ビジネスワイヤ(英語)
* Oasis calls for governance overhaul at Ain
after scandal and director arrests highlight lack of oversight
* Mr. Ito, after receiving Oasis's dismissal proposal, stands
down from the Board but only to simultaneously propose the
nomination of his own subordinate as a Director candidate in order
to bypass true accountability * Oasis nominates four new
highly-qualified, truly independent director candidates *
Oasis calls for Ain shareholders to vote FOR Oasis’s proposals
to improve Ain’s governance in the interest of all stakeholders
* Oasis calls for Ain shareholders to vote AGAINST Mr. Kimura,
as Mr. Ito evades accountability by nominating his
subordinate
More information available at
www.AinCorpGov.com
Oasis Management Company Ltd. (“Oasis”) is the manager to funds
that beneficially own approximately 15.1% of pharmacy franchise Ain
Holdings Inc. (9627 JT) (“Ain” or the “Company”). Oasis has adopted
the Japan FSA’s “Principles for Responsible Institutional
Investors” (a/k/a the Japan Stewardship Code) and, in line with
those principles, Oasis monitors and engages with its investee
companies.
In the interest of improving Ain’s corporate value, Oasis
strongly urges its fellow shareholders to vote AGAINST the
Company’s proposed “outside” director candidate, Mr. Shigeki
Kimura, and to vote FOR the Oasis shareholder proposals at the
Company’s upcoming AGM:
- Vote AGAINST: The appointment of Mr. Shigeki Kimura
- Vote FOR: Dismissal of board directors Mr. Shigeru Yamazoe
and Mr. Junro Ito
- Vote FOR: Election of four new outside director candidates:
Mr. Yoshitake, Mr. Maeda, Mr. Dmitrenko, and Mr. Shinmori
- Vote FOR: Introduction of a new compensation plan for
outside directors
Background – Ain’s scandal &
corporate governance failures
In late 2023, two directors from Ain and one of its subsidiaries
were arrested and subsequently found guilty of “Obstruction of
Auctions Related to Public Contracts” by a court of first instance
in connection with activities at the KKR Sapporo Medical Center.
The investigation report by Ain’s “External Investigation Team”
revealed that Ain had repeatedly replaced submitted proposal
documents after the submission deadline on multiple occasions.
Further, in the KKR Sapporo Medical Center case, it was found that
Ain illicitly obtained information from a KKR Sapporo Medical
Center employee to gain an unfair advantage over competitors in the
bidding process.
Following the incident, Ain set up an “Investigation Team”,
albeit with no guarantee of real independence. This is against the
best practices and relevant guidelines which recommend the
establishment of an independent third-party committee. The
existence of this “Investigation Team” was not disclosed until the
fact that the two directors from Ain and one of its subsidiaries
were found guilty was made public. Moreover, Ain’s management has
only offered questionable and unclear statements related to the
scandal. Further, Ain’s outside directors and outside auditors have
continuously refused any opportunity to directly discuss the
situation with Oasis, the Company’s largest shareholder. Without
meeting Oasis, it has been announced that they will be retiring
from their roles.
The shocking arrests and document-replacement practices at the
heart of the KKR Sapporo Medical Center case, as well as the
Company’s responses thereafter, underscore serious concerns about
Ain’s business ethics, compliance failures, poor corporate
governance, and insufficient oversight. However, we do not believe
that this incident is an isolated event given numerous serious
issues Oasis has identified at Ain that we believe highlight
pervasive problems of inadequate governance as well as the
Company’s responses thereafter. These examples include, but are not
limited to:
- Dysfunctional Board of Directors and Board of Corporate
Auditors: It appears that Mr. Otani has maintained practical
control over the selection of board members. It seems that his
choices are not made in the best interests of shareholders and Ain,
but rather with the aim of creating a group of allies for his own
self-preservation. As a result, all
current outside directors and outside corporate auditors lack true
independence; two of them are from Marubeni and Seven & i,
companies with which Ain has capital and business alliances and
other relationships, creating a clear conflict of interests. In
particular, we have had serious concerns about the qualifications
of outside director Mr. Yamazoe from Marubeni, who was previously
dismissed as a director by Fujitec. After Oasis submitted a
proposal calling for the dismissal of Mr. Yamazoe, Oasis
understands that our concerns were acknowledged by the Company,
which announced his retirement from the role. Additionally, the
retirement of two outside corporate auditors who have failed to
pursue accountability against the directors has been announced.
Oasis understands these retirements too to be an acknowledgement of
the concerns Oasis has shared with Ain. Despite this
acknowledgement, we are deeply concerned that the announced changes
to the board have resulted in an outside director ratio of less
than 50%, at a time when independent oversight is vital.
- Board’s Opposition to Oasis proposals for the sake of
opposition: The Company’s responses and opposition to Oasis’s
shareholder proposals are weak and illogical. For example,
regarding our proposed director candidate Mr. Yoshitake, the
Company stated that it “acknowledges, through the interview with
him, the high level of expertise in compliance and internal audit
that has been claimed he has, and highly respects his expertise”.
Yet, the Company opposed his appointment, despite them
acknowledging he has the skills Ain needs the most at the moment.
The Company’s opposition to our additional director candidates
follows the same pattern. It seems that the Company’s board is
opposing for the sake of opposition, rather than sincerely
considering who would be the best directors to enhance corporate
value.
- Last Minute Switch to Evade Shareholder Accountability:
Ain has taken a shocking step by nominating Mr. Ito’s subordinate,
Mr. Kimura, as a director candidate, while not renominating Mr. Ito
himself, who faces a proposal for dismissal. This move allows Mr.
Ito to escape accountability to shareholders, while maintaining
substantive influence over Ain through Mr. Kimura. This action
clearly goes against the best practices of corporate
governance.
- The Alliance with Seven & i Holdings: Not only did
Ain’s capital and business alliance with Seven & i result in a
significant dilution for Ain’s other shareholders through an
unnecessary third-party allocation to Seven & i, but it has
also failed to achieve any practical synergies or add profitability
over the last 15 years. On the other hand, not only has there been
a designated outside director seat for Seven & i executives at
Ain continuously, but the Company proposed the nomination of Mr.
Kimura from Seven & i as an outside director at this year’s
AGM.
- No Independent Oversight of Management: The absence of
appropriate independent oversight of CEO Mr. Otani has also had
detrimental effects on Ain’s performance. ROE has fallen to 8%,
which is considered the minimum acceptable level; TSR has
underperformed the TOPIX index by -127.5% over a 5-year period; and
EV/EBITDA has fallen over time, especially in recent years.
It is obvious that the current state of Ain is unacceptable. The
current so-called independent directors have failed to provide the
necessary oversight, leaving Mr. Otani unchecked and unaccountable.
This lack of true independence endangers the interests of all
stakeholders. Immediate change is imperative – shareholders must
unite to add real independence to Ain’s board and focus on
enhancing corporate governance. The time for action is now.
Therefore, in order to pave the way for Ain’s success as a
leading player in the pharmacy industry, Oasis urges all
shareholders to VOTE AGAINST the
appointment of Mr. Kimura and to VOTE
FOR Oasis’s proposals to add true independence and oversight
to the board.
Seth Fischer, Founder and Chief Investment Officer of Oasis
commented:
“Despite being Japan’s largest pharmacy chain, Ain is in a
disappointing state. With a truly independent board in place, Ain
will finally escape the poor management it has faced for decades.
However, staying complacent will be at the cost of all
stakeholders. The industry is increasingly competitive, and Ain
will be quickly overtaken. To avoid this, shareholders must work
together now to improve corporate governance.”
To learn more about Oasis’s proposals, please visit
www.AinCorpGov.com. We welcome all stakeholders to contact Oasis at
AinCorpGov@oasiscm.com to help improve Ain’s Corporate
Governance.
***
Oasis Management Company Ltd. manages private investment
funds focused on opportunities in a wide array of asset classes
across countries and sectors. Oasis was founded in 2002 by Seth H.
Fischer, who leads the firm as its Chief Investment Officer.
More information about Oasis is available at
https://oasiscm.com. Oasis has adopted the Japan
FSA’s “Principles for Responsible Institutional Investors” (a/k/a
Japan Stewardship Code) and, in line with those principles, Oasis
monitors and engages with our investee companies.
The information and opinion contained in this press release
(referred to as the "Document") is provided by Oasis Management
Company (“Oasis”) for informational purposes only or for reference
purposes only. The Document is not intended to solicit or seek
shareholders to, jointly with Oasis, acquire or transfer, or
exercise any voting rights or other shareholder’s rights with
respect to any shares or other securities of a specific company
which are subject to the disclosure requirements under the large
shareholding disclosure rules under the Financial Instrument and
Exchange Act. Shareholders that have an agreement to jointly
exercise their voting rights are regarded as Joint Holders under
the Japanese large shareholding disclosure rules and they must file
notification of their aggregate shareholding with the relevant
Japanese authority for public disclosure under the Financial
Instruments and Exchange Act. Except for the case where Oasis
expressly enters into the agreement as a joint holder requiring
such disclosure, Oasis does not intend to take any action
triggering reporting obligations as a Joint Holder. The Document
exclusively represents the opinions, interpretations, and estimates
of Oasis.
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