**Japanese Drugstore Chain Tsuruha Holdings Faces Shareholder Vote on Aeon Acquisition**
Shareholders of Tsuruha Holdings Inc., a prominent Japanese drugstore chain, are set to vote on Monday regarding a proposal that would effectively lead to its acquisition by Aeon Co., a major supermarket chain. This move has drawn criticism from significant investors and proxy advisory firms, highlighting a growing trend of shareholder activism in Japan as governance reforms empower investors.
The primary concern among shareholders revolves around the perceived inadequate premium offered to Tsuruha shareholders. Aeon, which is the largest supermarket operator in Japan, announced last month its intention to initiate a tender offer to acquire Tsuruha as a consolidated subsidiary at a price of 11,400 yen per share, aiming to strengthen its position in the drugstore market. However, this announcement was met with immediate backlash from Orbis Investments, the second-largest shareholder with a 9.7% stake, following Aeon’s 19.5% stake as of February 28, the end of Tsuruha’s last financial year.
Orbis has criticized the deal as flawed, arguing that it would enable Aeon to gain a controlling interest in Tsuruha under “outrageous terms.” The asset manager pointed out that Aeon had previously purchased a 13.6% stake from activist fund Oasis Management Co. for 15,500 yen per share in February 2024, making the current offer seem unfair. In response, Aeon stated that the synergies from the proposed integration would benefit all stakeholders, including Tsuruha shareholders.
Orbis, which adopts a value investment approach but does not engage in activist strategies, plans to oppose Tsuruha’s proposal for a share exchange with Welcia Holdings Co., another drugstore chain that is already majority-owned by Aeon. The UK-based asset management firm is joined by Norges Bank, which holds a 1.5% stake in Tsuruha, in opposing the acquisition.
Two major proxy advisory firms, Institutional Shareholder Services Inc. and Glass Lewis & Co., have also recommended that shareholders reject the proposal, citing similar concerns. The business integration proposal requires a two-thirds majority to pass.
Brett Moshal, head of the Japan investment team at Orbis Investments, expressed optimism about their chances at the upcoming Tsuruha AGM, noting that discussions with Tsuruha shareholders in Japan have been encouraging. Tsuruha’s share prices have risen above Aeon’s tender offer price, indicating that investors believe Aeon may need to increase its offer to secure minority shareholder support.
As the situation develops, Aeon has raised its stake in Tsuruha to 26.7%, while Orbis has increased its holdings to 10.3%. Akio Hoshi, a law professor at Gakushuin University, commented that Aeon’s tender offer price may not meet the expectations of many investors, especially considering its recent share purchases.
**FAQ**
*What is the main concern regarding the acquisition of Tsuruha Holdings by Aeon?*
The main concern is that the acquisition offer of 11,400 yen per share is perceived as too low, especially compared to the higher price Aeon previously paid for a stake in Tsuruha. This has led to significant opposition from major shareholders and proxy advisory firms.