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Activist fund tries to scupper Goldman Sachs, Nippo and Eneos deal

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One of Asia’s most aggressive activist funds has resorted to a high-profile online campaign to disrupt a buyout deal involving Goldman Sachs, Japan’s biggest energy group and an 87-year-old construction company.

Oasis, a Hong Kong-based hedge fund, has launched a website which lists a personal email address and other contact details of the head of business planning at Nippo Corporation, encouraging would-be bidders to make a takeover offer for the construction group.

The fund is targeting a deal that was initially presented by the companies involved as a mark of corporate governance progress in Japan. Hundreds of listed businesses in the country are subsidiaries of larger groups that continue to hold substantial or controlling stakes in the entities.

Eneos, a Japanese energy group, holds a 57 per cent stake in construction subsidiary Nippo, which it said it was buying-in to and delisting. Eneos has opted for a structure in the deal that engages the merchant banking unit of Goldman Sachs, a decision that has raised concerns among minority shareholders that they are being put at a disadvantage.

The structure leaves the US investment bank with the overwhelming “economic interest” in the construction company, according to investors who have complained directly to Nippo.

Oasis said Nippo was open to bids and that approaches to Eneos would not be treated as hostile, citing assurances last week from both companies.

Nippo declined to comment, saying it would make its stance clear once a regulatory review of its deal with Goldman Sachs was complete.

Eneos did not respond to a request for comment. Goldman Sachs declined to comment.

Activist investors have long criticised these structures as inherently unfair to minority shareholders and prone to poor governance by the boards of both parent and subsidiary companies. Some groups accused of poor corporate behaviour, such as conglomerate Hitachi, have responded by buying-in or selling-off listed subsidiaries.

Under the terms of the tender offer, which proposes the creation of two classes of shares, a special purpose vehicle established by Goldman Sachs will hold 49.9 per cent of voting shares and 80.1 per cent of non-voting stock. Oasis has described the combined 65 per cent interest as “financial arbitrage” in favour of Goldman Sachs.

Oasis said last month that the deal was “taking advantage of the ease by which a majority shareholder can force out minority shareholders at a cheap price to relist later, capturing the disparity between the price paid and the real price of the business and assets”.

At least four big minority shareholders in addition to Oasis have said the offer of ¥4,000 ($35) per share for Nippo’s minority shareholders significantly undervalued the company, and a fair price should be more than ¥5,600 per share.

Japan Catalyst, an activist fund recently set up by online brokerage Monex, has also questioned why negotiations had been carried out exclusively with Goldman Sachs.

“It is not an appropriate decision from the perspective of protecting the interests of minority shareholders to expect a counterproposal after the announcement of the deal in the Japanese market, where the implementation of counterproposals is far from common,” the fund said in a letter to Nippo’s board in late September.

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