The Case for a Fairer Deal Gets Stronger
Vote for the Oasis Shareholder Proposals
On April 26, 2018, Alpine and Alps released their full year results and provided guidance for FY2019. Alpine’s results significantly outperformed and substantially beat forecasts that had already been revised up twice. Alpine’s full year operating profit beat its original forecast by 111%. On the other hand, Alps substantially revised down its guidance, forecasting a 17% drop in operating profit for FY19. Alpine is clearly outperforming Alps, but Alpine’s minority shareholders continue to lose out.
· Alps’ share price has dropped due to its weakening fundamental business. As a result, the Share Exchange Ratio was valuing Alpine shares at just JPY1,724 per share, as at May 2, 2018, compared to the price following the announcement but before the 111% increase in operating profit of JPY2,108
· Alpine’s share price, as at May 2, 2018, was a 21% premium to the Share Exchange Ratio value
The Share Exchange Ratio of 0.68 substantially undervalued Alpine at the time of the share exchange announcement. Since then, Alpine beat its forecasted operating profit by 111% and Alps has forecasted a 20% drop in its operating profit next year.
Alpine’s shares are worth in excess of JPY4,000 per share -- well above the current implied value of just JPY1,724 per share.
We have also discovered that Hideo Kojima, the Alpine outside director and member of the Third-party Committee whose responsibility was to protect Alpine’s minority shareholders, has a long and deep history with Alps and its subsidiaries. He was one of the Ernst & Young auditors that were mentioned in the Alps Japanese annual reports in fiscal years 2005 and 2006. He was also the auditor of Alps Logistics, a 46.6% subsidiary of Alps, in the same years, and became the auditor at Alpine in 2011 and a board member in 2016.
In light of the continued abuse, we call on minority shareholders to vote for the following shareholder proposals at Alpine’s AGM in June 2018:
Shareholder Proposal 1 – Dividend of the Surplus
Oasis is asking shareholders to vote for a special dividend by Alpine of JPY325 per share.
A dividend of JPY325 will not remedy the undervaluation of the Share Exchange Ratio, but it will be a positive improvement. Support for the dividend will further demonstrate minority shareholder dissatisfaction, and push Alpine to renegotiate with Alps. This partially helps ameliorate the damage caused by the arbitrary allocation in the valuation of JPY30 billion to “working capital” when Alpine does not appear to have needed more than JPY3 billion of cash in hand for working capital before.
Shareholder Proposal 2 – Appointment of a Director
Oasis is nominating Mr. Naoki Okada as an additional independent director to Alpine’s Board of Directors. Alpine’s current Board of Directors, including its independent directors, have failed in treating all shareholders equally and in protecting minority shareholders. We believe that it is wholly appropriate for minority shareholders to elect truly independent directors that will act in the best interest of all stakeholders, and not just Alps.
Alpine stakeholders will benefit from Mr. Okada’s strong relationships with Japanese auto manufacturers as well as Korean companies, his expertise in sales and engineering roles, as well as his strong track record in developing new businesses with Japanese and Korean manufacturers at this critical time in the continued transformation of the automotive industry. In addition to protecting minority shareholders, we believe that the nomination of Mr. Okada will benefit all of Alpine’s stakeholders.
Shareholder Proposal 3 – Appointment of a Director and Audit Committee Member
Oasis is nominating Ms. Nao Miyazawa as an additional independent director to Alpine’s Board of Directors and as a member of Alpine’s Audit Committee. As stated above, Alpine’s current Board of Directors including its supposed independent directors has failed in treating all shareholders equally and in protecting minority shareholders. This is all the more true of the Audit and Supervisory Committee, which has the power to report directly to shareholders against management. Alpine’s Audit and Supervisory Committee has failed to effectively supervise Alpine’s management and protect all shareholders.
As a lawyer fully independent of Alpine, Ms. Miyazawa can rectify the failures of the current Audit Committee and make up for the questionable independence of Kojima-san as a member of the Audit Committee. Ms. Miyazawa will conduct the appropriate supervision and provide impartial advice to the Board of Directors that is in the best interests of all stakeholders, and not just Alps.