Oasis Urges Taiyo HD Shareholders to Vote Against the Re-election of Mr. Sato and Mr. Takano and Vote For Oasis’s Shareholder Proposals to Dismiss the Two for Better Governance at Taiyo Holdings Co., Ltd.

Business Wire

Wed, May 7, 2025, 1:44 AM 8 min read

HONG KONG, May 07, 2025--(BUSINESS WIRE)--Oasis Management Company Ltd. ("Oasis") is the manager to funds that beneficially own approximately 11% of electronic chemicals manufacturer Taiyo Holdings Co., Ltd. (4626 JT) ("Taiyo HD" or the "Company"). Oasis has adopted the Japan FSA’s "Principles of Responsible Institutional Investors" (a.k.a. the Japan Stewardship Code) and, in line with those principles, Oasis monitors and engages with its investee companies.

Oasis, a long-term shareholder of Taiyo HD, urges its fellow shareholders to exercise their voting rights to improve corporate governance at Taiyo HD at the upcoming Annual General Meeting of Shareholders to be held in June 2025 ("2025 AGM"). Taiyo HD, under the management of Mr. Eiji Sato, has a long history of sub-par governance and questionable business investments. Oasis urges all shareholders to:

Vote AGAINST the re-election of Mr. Eiji Sato, who has led, or has been deeply involved in: the Third Party Allotment; excessive compensation; excessive investment into and failure of Medical and Pharmaceutical business; the Thailand Incident and the failure to respond to the incident.
Vote AGAINST the re-election of Mr. Kiyofumi Takano, who is dispatched from DIC, who has a structural and significant conflict of interest with Taiyo HD and Taiyo HD’s general shareholders. Directors dispatched from DIC have a track record of failing to fulfill their monitoring function at Taiyo HD.
Vote AGAINST the election of any other DIC related personnel, if any other director candidates are dispatched by DIC.
Vote FOR the Oasis shareholder proposals to dismiss Mr. Sato and Mr. Takano.

Although Oasis’s concerns are broad and varied, the core concerns are as follows:

Third Party Allotment to dilute existing shareholders
- In the 2016 AGM, Mr. Sato was forced to withdraw two Company-proposed AGM agenda items on (1) Changes of Articles of Incorporation, as well as (2) Director Compensation, only eight days before the AGM, presumably due to significant opposition from Taiyo HD shareholders including the founding family, who held a c. 30% stake.
- After this, in 2017, Mr. Sato announced a capital and business alliance with DIC, under which he conducted a third-party allotment to DIC (the "Third Party Allotment"), which resulted in a 20% dilution for Taiyo HD’s existing shareholders, at a 10% discount.
- After the Third Party Allotment, Mr. Sato re-proposed substantially the same agenda items on (1) Changes of Articles of Incorporation and (2) Director Compensation, which he was forced to withdraw in the 2016 AGM, to the 2017 AGM, and had these agenda items passed with DIC’s support.
- It appears the Third Party Allotment was conducted with the primary intention of increasing Mr. Sato’s control over Taiyo HD by diluting Taiyo HD’s existing shareholders, including the founding family.

Excessive compensation for Mr. Sato
- Taiyo HD introduced a new compensation plan that significantly increased board’s discretion on director compensation in the 2017 AGM after the Third Party Allotment. This agenda item was originally withdrawn in the 2016 AGM due to shareholder opposition.
- Multiple analysis shows that Mr. Sato’s compensation is in the top 1~2% against peers in multiple metrics.
- Mr. Sato has benefited significantly from this excessive compensation package, which was initially withdrawn before the AGM due to shareholder opposition but reintroduced after the Third Party Allotment.

Excessive investment into and failure of Medical and Pharmaceuticals business
- In the 2017 AGM, Mr. Sato passed the changes of articles of incorporation that allowed him to enter the Medical and Pharmaceuticals business. This agenda item was originally withdrawn in the 2016 AGM due to shareholder opposition.
- Mr. Sato boasts entry into the Medical and Pharmaceuticals business as one of his core achievements, and has also appointed himself to the position of "Medical and Pharmaceuticals Company CEO".
- Mr. Sato has directed the Company to invest heavily in this business, almost double that of the Company’s core electronics business and equivalent to c. 70% of the Company’s total equity, but the Medical and Pharmaceuticals business remains extremely less capital efficient than the Company’s core Electronics business, with a ROIC far inferior to the Electronics business, below the Company’s WACC, making it a "value-destructive" business.

Thailand Incident and failure to respond to incident
- An arrest warrant for an incumbent statutory auditor of Taiyo HD, Mr. Ohki was issued for his actions (forging documents and submitting said documents to Thailand’s government) as the Managing Director of Taiyo HD’s Thailand local subsidiary (the "Thailand Incident"). Mr. Ohki was later arrested and convicted.
- Despite all of Taiyo HD’s directors and statutory auditors at the time being aware of this incident, the directors and the auditors failed to take any effective actions.
- Further, Oasis is aware of facts that reasonably suggest Mr. Sato not only had knowledge of the document falsification related to the Thailand Incident, but may have even played a leading role in it.
- The Company has not even disclosed this incident, and Taiyo HD cannot avoid the assessment that it has attempted to conceal the incident

Failure to fulfil monitoring function by DIC dispatched directors who have a conflict of interest
- DIC conducts significant business with Taiyo HD, and therefore directors dispatched by DIC to serve on the Taiyo HD board have a structural and significant conflict of interest with Taiyo HD.
- When an arrest warrant for an incumbent Statutory Auditor of Taiyo HD was issued in 2021, Mr. Tamaki, DIC’s representative director at the time who was also dispatched to Taiyo HD as a director, failed to take effective responses, despite knowing of such facts.
- Despite DIC’s representative director being aware of the Thailand Incident, DIC has continued to support the re-election of Mr. Sato thereafter.
- Amid suspicions of concealment surrounding the Thailand Incident at Taiyo HD, the actions of Mr. Tamaki and DIC cannot avoid the assessment that they were complicit in the concealment of a serious corporate governance crisis involving the arrest of a former statutory auditor of Taiyo HD.

Conclusion

Based on these facts, not only has Mr. Sato failed to appropriately manage the Company from the perspective of capital efficiency, but he also lacks the minimum level of governance awareness expected of executives at a listed company -- as evidenced by actions such as implementing the Third Party Allotment with the primary purpose of diluting unfavorable shareholders and his inadequate response to the Thailand Incident. Accordingly, Mr. Sato is unfit to serve as a director of the Company.

Similarly, accepting the dispatch of directors from DIC is not beneficial for the Company’s corporate governance. Rather, it is detrimental to the Company’s corporate governance, as this practice involves appointing individuals who have a conflict of interest and will only fail to exercise appropriate monitoring but also potentially participate in concealing significant corporate governance issues like Mr. Tamaki in the past.

Again, Oasis urges all shareholders to:

Vote AGAINST the re-election of Mr. Eiji Sato, who has led, or has been deeply involved in: the Third Party Allotment; excessive compensation; excessive investment into and failure of Medical and Pharmaceutical business; Thailand Incident and failure to respond to the incident.
Vote AGAINST the re-election of Mr. Kiyofumi Takano, who is dispatched from DIC and who has a structural and significant conflict of interest with Taiyo HD and Taiyo HD’s general shareholders. Directors dispatched from DIC have a track record of failing to fulfill their monitoring function at Taiyo HD
Vote AGAINST the election of any other DIC related personnel, if any other director candidates are dispatched by DIC.
Vote FOR the Oasis shareholder proposals to dismiss Mr. Sato and Mr. Takano.

Seth Fischer, Founder and Chief Investment Officer of Oasis, said:

"Mr. Sato has not only indulged in malpractice in corporate governance, but has also failed in allocating and managing the Company’s capital effectively. Now is the time for Taiyo HD’s shareholders to vote him and Mr. Takano off the Board in order to re-establish Taiyo HD’s corporate governance and to prepare the Company for growth in a capital effective manner."

For more information, please visit CorpGovForTaiyo.com. We welcome all stakeholders to contact Oasis at info@corpgovfortaiyo.com to help improve Taiyo HD’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. the Japan Stewardship Code) and, in line with those principles, Oasis monitors and engages with our investee companies.

The information and opinions contained in this press release (referred to as the "Document") are provided by Oasis Management Company ("Oasis") for informational or 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 in the event that 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.

View source version on businesswire.com: https://www.businesswire.com/news/home/20250506071185/en/

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