TOKYO - (Business Wire) Steel Partners Japan Strategic Fund (Offshore), L.P. (
“Steel Partners
”) today announced that it has provided to Shofu Inc. (TOKYO:7979) (
“Shofu
” or the
“Company
”) a presentation entitled
“Suggestions to Improve Corporate Value
” (the
“Presentation
”). In the Presentation, Steel Partners suggested specific ways that Shofu could improve its mid-term business plan, enhance shareholder returns, achieve higher capital efficiency and improve corporate governance.
Steel Partners said it is pleased that Shofu is steadily increasing profit through its core dental care business. However, Steel Partners believes Shofu’s management should have more accountability towards its shareholders regarding the use and rationality of retained earnings.
Steel Partners said it believes retained earnings should be used to invest in growth of the Company’s principal business instead of investing such capital in other companies’ shares or marketable securities that require an expertise outside of management's core competencies.
To the extent that retained earnings exceed a reasonable level, Steel Partners believes they should be returned to shareholders, including the employee stock holding group, through share repurchases or increased dividends.
Steel Partners made the following suggestions to Shofu:
- Use return on equity (“ROE”) as a benchmark and develop a mid-term plan that includes an ROE target at or above 8% in order to place more importance on capital efficiency in the Company’s business operations.
- Disclose Capex, depreciation & amortization, R&D, etc. in the mid-term plan to offer an explanation to shareholders on the use of retained earnings.
- Improve ROE and earnings per share through share repurchases or special dividends.
- Prudently increase the dividend payout ratio.
- Introduce a stock option program for board members to better align their interests with those of shareholders.
- Identify and nominate at least three qualified candidates to serve as independent outside board directors to monitor the improvement of capital efficiency and to maintain an appropriate balance among the Company’s stakeholders.
Steel Partners believes implementation of these suggestions could result in higher earnings per share and help Shofu achieve at least an 8% return on equity, the minimum return required by the Pension Fund Association of Japan (PFA) to support the re-election of directors to a company’s Board of Directors. Steel Partners noted that Shofu’s ROE has consistently failed to achieve the PFA’s minimum 8% threshold.
The Presentation is available for review and download at www.spjsf.jp.
Steel Partners, a shareholder of Shofu since April 2002, is currently its largest shareholder, holding 1,662,400 shares, or approximately 10.3% of the Company’s outstanding shares.
About SPJSF
Steel Partners Japan Strategic Fund (Offshore), L.P. is a long-term relationship/active value investor that seeks to work with the management of its portfolio companies to increase corporate value for all stakeholders and shareholders.
Japan Media Contact:
PRAP JAPAN
Dean Kirkness, 813-3486-2931
financial@prap.co.jp
or
US Media Contact:
Steel Partners Japan
Jason Booth, 310-941-3616
