- Call for strengthened governance
- Question the commercial logic of the current KV2027 strategy
- Support from ISS for improved share-based compensation
LONDON-Monday 16 March 2020 [ AETOS Wire ]
(BUSINESS WIRE)--
Independent Franchise Partners, LLP (“Franchise Partners”) welcomes the
support of Institutional Shareholder Services (“ISS”) and Glass Lewis
(“Glass Lewis”) for some of its shareholder proposals at the upcoming
Annual General Meeting (“AGM”) on 27 March 2020 at Kirin Holdings
Company, Limited (“Kirin” or “the Company”) (TSE: 2503).
Having
independently assessed the proposals made by Franchise Partners, the two
leading global proxy advisors, ISS and Glass Lewis, clearly confirm
that Kirin’s current strategic path is not convincing. As ISS puts it
“after almost 40 years, the link between fermentation, pharma, and beer
has not manifested itself in terms of returns or, margins, nor has
prevented the company from losing half of its beer market share in
Japan.” And as Glass Lewis further notes, “Kirin’s early struggles with
portions of its new “health science” segment, taken together with
clearly unfavorable trends in shareholder returns and a board seemingly
lacking relevant expertise, appear to support the notion that
shareholders would indeed benefit from an earnest and independent
re-examination of the diversification initiatives underpinning the
KV2027 tack.”
Franchise
Partners strongly believes that focus and innovation in beer would be a
better use of capital, less risky and deliver more attractive long-term
returns for shareholders. As such, Franchise Partners urges fellow
co-owners to support the advisory share buyback proposal to signal to
Kirin’s Board that a much needed independent review of its long-term
strategy be undertaken.
The proposed
¥600 billion buyback is drafted as the maximum amount to be bought back,
which affords Kirin complete strategic discretion and financial
flexibility. Franchise Partners does not expect the Board to enact the
buyback proposal in full if it is considered to risk the Company’s
financial position. The Kirin Board has the ultimate decision-making
responsibility for the timing of any possible disposals of non-core
assets and the distribution of the proceeds.
As ISS
suggests, “the board’s credibility is key to convincing shareholders
that its strategies are the product of healthy internal debate.” To this
end, Franchise Partners welcomes ISS and Glass Lewis’s support for
Nicholas Benes. The appointment of Kanako Kikuchi, who is supported by
Glass Lewis and is viewed by ISS as “a well-qualified candidate who
would be additive,” is key given that she would be the only director
with direct prescription pharmaceutical experience. This is particularly
important considering Kirin’s current motivation to diversify into the
healthcare space.
Kirin has
exhausted all available Board seats with its four new proposed directors
who “largely have pre-existing ties to the company” according to ISS.
ISS further adds that the “seemingly premature support (implicit or
explicit) for the company’s stated strategy” by these directors
demonstrates the need for independent oversight at Kirin. In order to
create vacant seats on the Board for Kanako Kikuchi and Nicholas Benes,
Franchise Partners encourages shareholders to vote FOR them and AGAINST
three of Kirin’s candidates identified by Glass Lewis or ISS: Toshiya
Miyoshi (proposal 2.3), Hiroyuki Yanagi (proposal 2.8), and Noriko
Shiono (proposal 2.10).
Finally,
Franchise Partners welcome ISS’s support for its proposal to increase
the portion of performance-based equity compensation within the total
pay package as well as improve Kirin’s disclosure of performance
targets.
There are clear paths available to create a more valuable and sustainable Kirin, as detailed on Franchise Partners dedicated website.
Franchise Partners encourages fellow shareholders to support all of its
shareholder proposals to strengthen Kirin’s board via the appointment
of independent and qualified board candidates Nicholas Benes (item 9.1)
and Kanako Kikuchi (item 9.2), better align management compensation with
shareholder value creation (items 7 and 8), and unlock value via the
advisory share buyback proposal (item 6).
View source version on businesswire.com: https://www.businesswire.com/news/home/20200316005172/en/
Contacts
For English speaking queries
Helena Johansson
Independent Franchise Partners, LLP
Switchboard: +44 (0)207 495 9070
abetterkirin@franchisepartners.com
For Japanese speaking queries
International Financial Consulting (IFC)
Takee, Takasugi
Tel: +81-3-5532-8921
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