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Evaluation-Retail large Aeon holding out as Japan dismantles controversial listings By Reuters


© Reuters. FILE PHOTO: Aeon Co Ltd’s emblem is seen on its shopping center in Chiba, Japan, Nov. 3, 2016. REUTERS/Kim Kyung-Hoon/File Photograph

By Makiko Yamazaki and Ritsuko Shimizu

TOKYO (Reuters) – As many Japanese corporations bow to stress from shareholders and regulators to finish the observe of itemizing subsidiaries – which critics say compromises company governance – one of many nation’s greatest retailers is not shopping for it.

Aeon Co Ltd, whose 15 listed subsidiaries embody supermarkets and drugstores, mentioned so-called parent-child listings enhance, relatively than hinder, governance.

“It is essentially the most cost-effective approach to strengthen administration of our subsidiaries,” Govt Officer Tsukasa Ojima advised Reuters in a current interview.

Listed corporations will need to have larger disclosure requirements and administration is all the time underneath shareholder scrutiny, leading to higher high quality administration, mentioned Ojima, a former Nomura Securities banker who joined Aeon final 12 months.

The feedback set Aeon other than many different corporations at a time when the federal government and Tokyo Inventory Change (TSE) discourage such listings and are setting stricter governance necessities.

Itemizing a subsidiary was as soon as a well-liked approach in Japan for a listed mum or dad to lift funds and keep affect. However governance consultants have lengthy branded the observe as basically unfair to minority shareholders, whose pursuits are inevitably subordinated to these of the mum or dad.

Some buyers say the potential for conflicts of curiosity dulls listed subsidiaries’ valuations, whereas others like hedge funds goal such corporations in anticipation of buyouts or gross sales.

With rising criticism, notably from overseas the place such listings are uncommon, authorities have step by step cracked down on the observe. The screws tightened in April when the TSE reorganised its markets into three new tiers and commenced requiring listed subsidiaries to safe larger board independence or arrange an unbiased particular committee to stay within the prime tier.


With the elevated regulatory scrutiny, the variety of listed subsidiaries has roughly halved to 219 this 12 months from a peak of 417 in 2007, confirmed information from Nomura Institute of Capital Markets Analysis.

In a single instance, Hitachi (OTC:) Ltd divested or absorbed almost all of its 22 listed subsidiaries during the last decade. Large names who proceed to have listed subsidiaries embody SoftBank Group Corp and Fujitsu Ltd.

Extra corporations are prone to unwind parent-child listings as governance reform has compelled a re-think of enterprise portfolios and capital effectivity, mentioned Hiroshi Yagi, who advises on capital technique at Mizuho Belief & Banking.

“Many corporations have stored their subsidiaries listed for functions unrelated to their enterprise portfolios, comparable to letting their items have the status of listed standing or to lure prime expertise,” mentioned Yagi.

The revelation final month that Hino Motors Ltd had falsified emissions information for nearly twenty years highlighted what analysts known as Toyota Motor (NYSE:) Corp’s indecisive technique over its listed truck and bus subsidiary, the place they mentioned Hino’s half-hearted independence allowed ineffective governance.

The automotive maker acquired 50.1% of Hino in 2001 since when almost all presidents have been from Toyota.

Toyota’s chief communications officer, Jun Nagata, advised reporters the automaker had created little synergy with Hino and some years in the past mentioned methods to reinforce ties, together with the potential of taking full possession.


Aeon’s Ojima mentioned the retailer has safeguards to forestall potential points related to parent-child listings.

Every of its listed subsidiaries – together with Aeon Mall Co Ltd, Maxvalu Tokai Co Ltd and Welcia Holdings Co Ltd – is run independently by consultants in its area to realize its personal revenue progress, whereas having the ability to faucet sources on the mum or dad comparable to buyer information and model energy, Ojima mentioned.

“If dad and mom can ensure that the rights of listed subsidiaries’ minority shareholders will not be sacrificed and may clarify clear advantages, such listings most likely do not must be banned,” mentioned Waseda Enterprise Faculty professor Kazunori Suzuki.

No research have thus far proven that listed subsidiaries lag different corporations in monetary efficiency, Suzuki mentioned.

“However we have seen so many shady instances up to now, the place dad and mom listed their subsidiaries out of want for money and later re-absorbed them at costs decrease than their preliminary choices.”

A bunch of institutional buyers in a report final 12 months mentioned minority shareholders of listed subsidiaries are essentially the most weak in emergency conditions comparable to buyouts.

“The mum or dad can purchase out the listed unit at a reduction by benefiting from its controlling shareholder standing,” the group mentioned. “Issues about such dangers can’t be dispelled irrespective of how loudly the mum or dad says it respects the subsidiary’s independence.”

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